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Economic Growth

Economic growth is a positive circumstance for any nation. It raises the standard of living, cuts down on government responsibilities, and alleviates many of the ills of society.

One of the most important aspects of economic growth is the standard of living. Standard of living is the quality of life based on the possession of necessities and luxuries that make life easier. In a market economy, one of the features of the standard of living is its ability to increase real per capita output.

Another feature would be the ability of the standard of living to increase people's free time because of their economic sufficiency. Government spending is another feature of economic growth. Because a large amount of the government's income comes from the taxpayers, an improvement in the economy can lead to the creation of a larger tax base. In the end, this money that the government collects, can add to improving the quality of public services.

The third aspect of economic growth is domestic problems. As with any nation, the United States faces a multitude of levels of poverty, medical care, inequality of opportunity, and economic instability. Most of these problems are the result of economic need. With a growing economy, many of these societal ills are reduced because of the creation jobs and income for many of the underprivileged.

Helping other nations is the fourth aspect of economic growth. As our economy grows, so does American demand for foreign made products. With the United States purchasing foreign goods, we are helping to create jobs and improve the economy of that nation. In return, an increased income for citizens of other nations enables them to purchase American goods. An increase in foreign trade also assists other countries in their allocation of resources. When the U.S. purchases foreign goods, productive resources in those nations are attracted to the growing export industries. Thus in the long run, world economic growth is stimulated.

The fifth and final aspect of economic growth is the global role model. In a time where many nations are establishing a foothold in the world, they are copying the economic and political ideologies of other established and industrial nations. During the Cold War, countries of the free world and the communist world tried to influence the economic development of developing nations. But with the fall of the USSR nearly 10 years ago, the U.S. has increased its global influence.

Factors That Influence Economic Growth

The factors that influence economic growth are the same as the factors of production. Land, the first factor, is one of the greatest resources in the United States. Though we must import certain elements, the U.S. is reasonably self-sufficient in many other natural resources. But in order to sustain this level of self-sufficiency, the United States must conserve its natural resources because they are rapidly decreasing.

Capital is the second factor influencing economic growth. Economists frequently use the capital-to-labor ratio, which is obtained by dividing total capital stock by the number of workers in the labor force. The ratio therefore stands for the average amount of capital stock each worker uses in his or her job. Capital goods are the result of production, making it possible to influence their creation. The key to the creation is saving, and the saving is left up to the consumer. When people cut back on consumption to save and invest, they liberate factors of production to generate new capital. Yet this tactic is not always possible. In some countries, people are so impoverished that they cannot bear to save their money because it would compromise their survival. In these countries there is low investment in capital goods.

Labor is the third factor that influences economic growth. A skilled and growing labor force within a nation allows its economy to grow. In general, the rule is, is that the size of a labor force is related to the size of the population. It the rate of population growth declines, so does the labor force growth rate. This is where foreign workers step in. New additions to the labor force help offset a labor shortage. Worker desire and motivation are other factors that affect the quality of the labor force.

The fourth and final factor of economic growth is entrepreneurs. Just because a nation has many workers and other growth potentials, it doesn't ensure the success of the economy. A very important factor is the presence of entrepreneurs who add a twist to the economy by bringing to it innovation. All entrepreneurs need is a business climate to permit them to succeed. Such a climate would include minimum government involvement, and an economic system, which allows them to keep most of their profits.


Productivity is the level to which productive resources are used efficiently. Basically this means the amount of goods that are produced at the lowest price. When this is present, a nation is saving money, and increasing its revenue. As a result, the government takes in more money, and is able to spend more on public works, and on the underprivileged of society. By having a high level of productivity, a nation's economy, provided other factors permit, is strong and vibrant.

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