4 factorsofeconomicgrowth

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4 factorsofeconomicgrowth

  1. 1. Factors that Lead to Economic Growth Unit 4 Notes
  2. 2. Economic Growth  There are 4 factors that influenceThere are 4 factors that influence economic growth within a country:economic growth within a country:  Investment in Human CapitalInvestment in Human Capital  Investment in Capital GoodsInvestment in Capital Goods  Natural Resources availableNatural Resources available  EntrepreneurshipEntrepreneurship  The presence or absence of these 4The presence or absence of these 4 factors determine the country’sfactors determine the country’s Gross Domestic Product for the yearGross Domestic Product for the year
  3. 3. What is Human Capital?  All of the skills, talents, education, and abilitiesAll of the skills, talents, education, and abilities that human workers possess---and the value thatthat human workers possess---and the value that they bring to the marketplacethey bring to the marketplace  Examples: computer/reading/writing/math skills,Examples: computer/reading/writing/math skills, talents in music/sports/acting, ability to followtalents in music/sports/acting, ability to follow directions, ability to serve as group leader & cooperatedirections, ability to serve as group leader & cooperate with group memberswith group members  A country’s Literacy Rate impacts Human Capital--A country’s Literacy Rate impacts Human Capital-- the percent of the population over 15 that canthe percent of the population over 15 that can read/writeread/write
  4. 4. How does Human Capital Influence Economic Growth?  Nations that invest in the health, education,Nations that invest in the health, education, & training of their people will have a more& training of their people will have a more valuable workforce that produces morevaluable workforce that produces more goods & servicesgoods & services  People that have training are more likely toPeople that have training are more likely to contribute to technological advances,contribute to technological advances, which leads to finding better uses ofwhich leads to finding better uses of natural resources & producing more goodsnatural resources & producing more goods
  5. 5. What are Capital Goods?  All of the goods that are produced in the country and then used to make other goods & services  Examples: tools, equipment, factories, technology, computers, lumber, machinery, etc.  What are some capital goods used in our classroom?
  6. 6. How do Capital Goods influence Economic Growth?  The more Capital Goods a country has = the more goods & services they are able to produce  The US has superior capital goods.
  7. 7. What are Natural Resources?  All of the things found in or on the earth;All of the things found in or on the earth; “gifts of nature”“gifts of nature”  Examples: rivers, minerals, animals,Examples: rivers, minerals, animals, plants, oil, timber, etc.plants, oil, timber, etc.
  8. 8. How do Natural Resources Influence Economic Growth?  Countries that have a lot of naturalCountries that have a lot of natural resources are able to use them toresources are able to use them to produce goods & services cheaper than aproduce goods & services cheaper than a country that has to import naturalcountry that has to import natural resourcesresources  Russia is rich in natural resources, butRussia is rich in natural resources, but because of the harsh climate & size, it’sbecause of the harsh climate & size, it’s hard for Russians to get to them.hard for Russians to get to them.
  9. 9. What is Entrepreneurship?  It can be several things:It can be several things:  Starting your own businessStarting your own business  Inventing something newInventing something new  Changing the way something was previouslyChanging the way something was previously done so that it works betterdone so that it works better  Can you name any entrepreneurs thatCan you name any entrepreneurs that you’ve heard of in the past?you’ve heard of in the past?
  10. 10. How does Entrepreneurship Influence Economic Growth?  Entrepreneurship creates jobs andEntrepreneurship creates jobs and lessens unemploymentlessens unemployment  Encourages people to take risks, and inEncourages people to take risks, and in doing so, they’ve created betterdoing so, they’ve created better healthcare, education, & welfarehealthcare, education, & welfare programsprograms  The more entrepreneurs a country has,The more entrepreneurs a country has, the higher the country’s GDP will be…the higher the country’s GDP will be…
  11. 11. How is Economic Growth Measured?  Economic growth in a country isEconomic growth in a country is measured by the country’s Grossmeasured by the country’s Gross Domestic Product (GDP) in one yearDomestic Product (GDP) in one year  GDP = the total amount of final goods andGDP = the total amount of final goods and services produced in one year within aservices produced in one year within a countrycountry
  12. 12. Gross Domestic Product  GDP is a domestic measurement because itGDP is a domestic measurement because it measures only what has been producedmeasures only what has been produced within the country--this doesn’t includewithin the country--this doesn’t include products that are imported.products that are imported.  It is much better for the economy of aIt is much better for the economy of a country to produce its own goods andcountry to produce its own goods and services (this increases the country’s GDP).services (this increases the country’s GDP).
  13. 13. Gross Domestic Product  Measuring the GDP each year can:Measuring the GDP each year can:  Compare one country’s economy to anotherCompare one country’s economy to another  Check a country’s economic progress overCheck a country’s economic progress over timetime  Show if the economy is growing or notShow if the economy is growing or not
  14. 14. Standard of Living  The higher a country’s GDP = a betterThe higher a country’s GDP = a better standard of living for the people withinstandard of living for the people within the countrythe country  In order for a country to have anIn order for a country to have an increasing GDP, it must invest in humanincreasing GDP, it must invest in human capital through education & training, andcapital through education & training, and it must produce goods that have value toit must produce goods that have value to be sold within the country or exported.be sold within the country or exported.

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