PPCs+-+Factors+that+Contribute+to+Economic+Growth

Factors That Contribute to Economic Growth

Economic growth is defined as the increase of the value of goods and services created in a given economy. This concept is shown graphically by a shift of the productions possibilities curve outward from the origin. Economic growth can only occur if the efficiency of an economy is increased, and the number of resources that can be used is increased and used fully.

Five things can cause economic growth: an increase in the amount of resources, an increase in resource quality, technological advances, increases in population, and international trade. Increases in the amount of resources, increases in population and international trade all increase the number of resources that can be used in an economy. An increase in resource quality and technological advances both increase the efficiency of an economy.

Further information about factors that contribute to economic growth: [|Economic Growth]-This site gives a broad overview of the concept of economic growth, and factors that contribute to it. [|Population: Is it a factor?]-This page has an article debating Malthus' idea that population increases lead to economic growth, using Asia as a primary example. [|Education and Economic Growth]-This article talks about how education improves resource quality (human labor) and contributes to overall economic growth.

Sample Problem: A strange Eastern European country has decided that for the time being they will only produce computers and windmills- making them a perfect example for a production possibilities curve! If all resources are being utilized fully and the Soviet dictator of the country decides that the country will now make a larger proportion of windmills to cars than they had previously, does this represent economic growth for their own economy? //(see answer below...)//

Italian immigrants to America at Ellis Island, ca. 1905. During this time, America experienced a growth in its economy, partially due to the increased amounts of labor available due to the many immigrants from Eastern Europe.

media type="youtube" key="SkvpEfAPXn4&hl=en&fs=1" height="344" width="425" Here is an example of how technological advances can increase efficiency. With these new robots, jobs that were either slower or more expensive (in cost of labor, time, and in the cost paid for injuries or deaths due to dangerous tasks) to be done by humans now can be done faster and less expensively by robots- increasing efficiency and ultimately helping the economy grow.

Answer: No, it doesn't! This change that the leader desires represents a shift along the current production possibilities curve, not a push outwards from it. In order for them to produce more of both products, the country must somehow increase their resources, improve their resource quality, gain technological advances of some sort, increase their population, or spark greater international trade.