The Determinants of Economic Growth Flashcards
what determines economic growth
stock of natural, human and capital resources available for use in production as well as how they are managed (enterprise) - quantity and quality of stock
why are natural resources important to economic growth (referring to productivity)
they are the foundation of economic growth in the early stages of development - new resources increase the quantity that can be used in production with the help of enterprise to increase productivity (fracking/irrigation)
(natural) explain how labour (natural and migration) effects demand and labour supply
natural increase: creates immediate demand but not immediate and labour supply
Migration: creates demand and supply
what is human capital
the stock of knowledge and skills that people develop through education and experience
how is human capital developed through the provision of …. (3points)
- social infrastructure
- education (develops skills and provides knowledge)
- further edu and job training (develops job related skills)
how do people and firms invest in human capital
- people invest in human capital by enrolling in school/training
- firms invest in HC by hiring skills workers/skilled training
why do firms encourage investment in human capital and how does this encouragement benefit the commuinty
to have a smarter community therefore there are social benefits:
tax differences between skilled and unskilled workers, adaptable workforce, educated ppl provide
how does migration affect human capital (discus the migration policy)
increases the quality of labour force by adding skills, the migration policy has sought skilled migrants
how does capital resources affect economic growth
increases the quantity of capital equipment will also impact growth.
what are the 2 types of investment
- public investment - provides social infrastructure and provides stock for priv sector
- private investment - buildings, machinery, equipment
what are the 2 causes of capital accumulation
capital widening
capital deepening
when is capital stock widened
stock of capital is widened when it grows in proportion to other productive inputs (when investment increases)
(capital widening) what influences investment decisions (4 examples)
interest rates, expectations, level of past profits, market structures, gov policies, tech adanvces
when is capital stock deepening
an increases in the stock of capital relative to the stock of other productive resource - production becomes more capital intenstive (increase in labour productivity)
describe what happens to economic growth in the boom
econ growth is above trend, spending is higher as more people are employed and they may earn pay rises and more confident in spending (firms use more resources)
