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Factors That Lead To Economic Growth
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Factors That Lead To Economic Growth

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  • 1. How do human capital and capital goods influence the GDP of a nation?
  • 2. Human Capital and Capital Goods
    • Human capital is the value that people bring to the marketplace.
    • Capital goods are the products that have value.
    • Countries that invest in human capital and capital goods will most likely be stronger than those countries that do not.
  • 3. Human Capital
    • Nations that invest in the health, education and training of their people will have a more valuable workforce.
    • A more valuable workforce will produce more services and capital goods.
    • People that have education and training are more likely to contribute to technological advancements.
    • Technological advancements can lead to better ways of acquiring natural resources.
  • 4. Human Capital (con’t)
    • Technological advancements can lead to a more efficient use of resources.
    • With a more valuable workforce and more technological advancements, countries can produce more goods.
  • 5. Capital Goods
    • Capital goods are products that have value.
    • These products can be large or small.
    • Examples of capital goods are tractors, telephones, computers, irons, lumber, hammers and nails.
  • 6. GDP - Gross Domestic Product
    • GDP is the total amount of final goods and services produced in one year within a country.
    • All the goods and services have to be counted.
    • All the capital goods such as cars, computers, food and books sold are counted in that year.
    • All the services of doctors, bankers, and professional sports players are counted.
  • 7. Gross Domestic Product - GDP is the total amount of final goods and services produced within a country in one year.
    • The GDP is a gross measurement because it includes the total amount of goods and services produced in a year but not necessarily sold within that year. A tractor may be produced in November of one year but not sold until February of the next year. That tractor would be counted as part of the GDP for the year it was produced not sold.
  • 8. Gross Domestic Product - GDP is the total amount of final goods and services produced within a country in one year.
    • The GDP is a measurement of the final goods produced because it only counts the final sale amount of the goods.
    • (Continued on next slide)
  • 9. Gross Domestic Product - GDP is the total amount of final goods and services produced within a country in one year.
    • For example books are made from paper which is made from lumber which comes from trees. The lumber is made into rolls of paper which is a product but those rolls of paper are sold to book companies who take the rolls of paper and make them into books. The books are sold to retailers who sell them to the individual customers. Only the final sale counts toward the GDP.
  • 10. Gross Domestic Product - GDP is the total amount of final goods and services produced within a country in one year.
    • The GDP is a domestic measurement because it measures only what has been produced within the country. This does not include products in a country that have been imported.
    • It is much better for the economy of a country to produce its own goods and services as it increases the county’s GDP.
  • 11. Gross Domestic Product - GDP is the total amount of final goods and services produced within a country in one year.
    • Measuring the GDP each year can show if the economy is growing or not. It can be used to compare one economy against another. It can also be used to compare an economy’s progress over time.
  • 12. How do human capital and capital goods influence the GDP of a nation?
    • In order for a country to have an increasing GDP, it must invest in human capital through education and training and it must produce goods that have value to be sold within the country or exported.