- Economic
growth is a sustained rise in a nation's production of goods and services.
It results from investments in human and physical capital, research
and development, and technological change, and from improved institutional
arrangements and incentives. Historically, economic growth has been
the primary vehicle for alleviating poverty and raising standards
of living. Economic growth creates new employment and profit opportunities
in some industries, but growth reduces opportunities in others. Much
like free international trade,
it changes the composition of employment.
- Investments
in new physical or human capital
involves a trade off of lower current consumption in anticipation
of greater future production and consumption. Higher interest rates
discourage investment.
- Productivity
is measured by dividing output (goods and services) by the number
of inputs used to produce the output. A change in productivity is
a change in output relative to input. Increases in productivity results
from advances in technology and other sources.
- Technological
change is an advance in knowledge leading to new and improved goods
and services and better ways of producing them.
- The
rate of productivity increase in an economy is strongly affected by
the incentives that reward successful innovation and investments (in
research and development, and in physical and human capital.)
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