Economic growth is particularly important in developing economies. Reduced Unemployment. A stagnant economy leads to higher rates of unemployment and the consequent social misery. Economic growth leads to higher demand and firms are likely to increase employment.

Country M hopes to encourage economic growth by investing in education to reduce unemployment and increase production. The primary factors of production are labor, capital, and land.

Six Factors Of Economic Growth

• Natural Resources. The discovery of more natural resources like oil, or mineral deposits may boost economic growth as this shifts or increases the country’s Production Possibility Curve.
• Physical Capital or Infrastructure.
• Population or Labor.
• Human Capital.
• Technology.
• Law.

The increasing population adversely affects the national income and the per capita income. Due to this, the people have a low standard of living, which makes them less efficient. This hinders the rapid development of the country.

7 also illustrates how one hurdle raises yet other hurdles. Low incomes lead to low saving; low saving retards the growth of capital; inadequate capital prevents introduction of machinery and rapid growth in productivity; low productivity leads to low incomes.

The rate of unemployment is different for the economy of different countries. In the developed country, the economy is good even though the rate of unemployment is high since citizens are self-employed. Due to the unemployment, government suffers the borrowing effect that means lower consumption rate and productivity.

Poor nations suffer tremendously on human development indicators such as health, education, and mortality. Women in poor nations fare much worse than men in these nations. They are victims of violence and other abuse because they are women, and they are less likely to attend school and more likely to be poor.

Using these ideas, Rostow penned his classic Stages of Economic Growth in 1960, which presented five steps through which all countries must pass to become developed: 1) traditional society, 2) preconditions to take-off, 3) take-off, 4) drive to maturity and 5) age of high mass consumption.

Economic growth has also been understood to establish the conditions for economic development. The better-known models of economic growth such as the Lewis, Rostow, Harrod-Domar, Solow, and Romer growth models are discussed.

GDP is probably the best measure of the overall condition of the economy because it includes the output of all sectors of the economy. Job growth is classified as a coincident economic indicator, meaning that job growth rates move closely in line with GDP and the overall economy.