Economic Growth: Definition and Features

Questions and Answers

An increase in the production of goods and services

Technology

Shift from agriculture to industry and services

An expansion of a country's productive capacity through investments in capital, technology and human resources Signup and view all the answers

The value of all goods and services produced within a given period Signup and view all the answers

Classical Growth Theory Signup and view all the answers

The role of capital accumulation, labour and technological progress Signup and view all the answers

Diminishing returns and population growth Signup and view all the answers

Study Notes

Economic growth is an increase in the production of goods and services available in an economy, reflecting the degree of productivity.
Three main factors involved in economic growth are:
- Technology
- Labour
- Capital

Enhanced Quality of Life: improved education, healthcare, infrastructure, and overall well-being of the population.
Structural Transformation: shift from agriculture to industry and services, with improvements in productivity and efficiency across sectors.
Expansion of Productive Capacity: expansion of a country's productive capacity, enabling the production of more goods and services over time through investments in capital, technology, and human resources.
Rise in Per Capita Income: increase in average income of citizens, reflecting improvements in living standards.
Increase in Real GDP: increase in a country's real Gross Domestic Product (GDP), measuring the value of all goods and services produced within a given period, adjusted for inflation.

Classical Growth Theory:
- Pioneered by Adam Smith, David Ricardo, and Thomas Malthus.
- Emphasizes the role of capital accumulation, labour, and technological progress.
- Posits that economies grow through investment in capital, but growth is ultimately limited by diminishing returns and population growth.
Neo-Classical Growth Theory:
- Developed by Robert Solow and Trevor Swan in the 1950s.
- Focuses on the roles of capital accumulation, labour force growth, and technological progress.
Endogenous Growth Theory:
- Developed in the 1980s by Paul Romer and Robert Lucas.
- Emphasizes that economic growth is primarily the result of endogenous (internal) factors such as human capital, innovation, and knowledge rather than external ones.