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Economic growth


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Economic growth

  1. 1. Economic Growth
  2. 2. Economic Growth v/s Development Economic Growth is supposed to be a natural or normal process requiring no special efforts on the part of the community. Economic Development involves certain structural changes without which the inertia of the social system cannot be overcome and a decisive break with the past achieved.
  3. 3. Meaning:- An increase in the capacity of economy to produce goods and services, compared from one period of time to another. Economic growth can be measured in nominal terms, which include inflation, or in real terms, which are adjusted for inflation. Economic growth can be defined as increase in a countrys productive capacity as measured by comparing gross national product (GNP) in a year with the GNP in the previous year.
  4. 4.  Economic growth can be defined as an increase in aggregate output of real goods and services during a given period of time, generally a year. Output is measured in terms of money, but the value of money changes with changes in price level. The initial estimate of aggregate output prepared at current prices for a given period is adjusted for price level changes during the period, which indicates the real output in terms of the prices of the base year. The method of adjusting the total output for a given period in terms of prices of the base year is as follows:-Agg. Prod. @ constant prices= Agg. Prod. @ current prices x 100 Price index of current period
  5. 5. Determinants of Economic Growth:- Economic Factors:-  Rate of Capital Formation:- Capital formation is one of the most important and strategic determinant of economic growth. Generally, economic growth can be regarded as the direct function of the rate of capital formation.  Capital output ratio:- The growth of output in an economy also depends upon the capital-output ratio. It is also known as the ‘Investment Income’ of ‘Capital Coefficient’. It shows the relationship between capital investment and the emergent output consequent upon the investment.  Rate of growth of population:- The rapid growth of population in most of the countries neutralizes an initial economic improvement which takes place on account of economic growth.
  6. 6.  Political and administrative Factors:- Social Factors:-  Socio cultural attitudes of the people.