Factors that Lead to Economic Growth

Factors that Lead to Economic Growth

Unit 4 NotesUnit 4 Notes

Economic GrowthEconomic Growth There are 4 factors that influence There are 4 factors that influence

economic growth within a country:economic growth within a country: Investment in Human CapitalInvestment in Human Capital Investment in Capital GoodsInvestment in Capital Goods Natural Resources availableNatural Resources available EntrepreneurshipEntrepreneurship

The presence or absence of these 4 The presence or absence of these 4 factors determine the country’s Gross factors determine the country’s Gross Domestic Product for the yearDomestic Product for the year

There are 4 factors that influence There are 4 factors that influence economic growth within a country:economic growth within a country: Investment in Human CapitalInvestment in Human Capital Investment in Capital GoodsInvestment in Capital Goods Natural Resources availableNatural Resources available EntrepreneurshipEntrepreneurship

The presence or absence of these 4 The presence or absence of these 4 factors determine the country’s Gross factors determine the country’s Gross Domestic Product for the yearDomestic Product for the year

What is Human Capital?What is Human Capital?

All of the skills, talents, education, and All of the skills, talents, education, and abilities that human workers possess---abilities that human workers possess---and the value that they bring to the and the value that they bring to the marketplacemarketplace Examples: computer/reading/writing/math Examples: computer/reading/writing/math

skills, talents in music/sports/acting, ability skills, talents in music/sports/acting, ability to follow directions, ability to serve as group to follow directions, ability to serve as group leader & cooperate with group membersleader & cooperate with group members

A country’s Literacy Rate impacts A country’s Literacy Rate impacts Human Capital--the percent of the Human Capital--the percent of the population over 15 that can read/writepopulation over 15 that can read/write

All of the skills, talents, education, and All of the skills, talents, education, and abilities that human workers possess---abilities that human workers possess---and the value that they bring to the and the value that they bring to the marketplacemarketplace Examples: computer/reading/writing/math Examples: computer/reading/writing/math

skills, talents in music/sports/acting, ability skills, talents in music/sports/acting, ability to follow directions, ability to serve as group to follow directions, ability to serve as group leader & cooperate with group membersleader & cooperate with group members

A country’s Literacy Rate impacts A country’s Literacy Rate impacts Human Capital--the percent of the Human Capital--the percent of the population over 15 that can read/writepopulation over 15 that can read/write

How does Human Capital Influence Economic

Growth?

How does Human Capital Influence Economic

Growth? Nations that invest in the health, Nations that invest in the health,

education, & training of their people education, & training of their people will have a more valuable workforce will have a more valuable workforce that produces more goods & servicesthat produces more goods & services

People that have training are more People that have training are more likely to contribute to technological likely to contribute to technological advances, which leads to finding advances, which leads to finding better uses of natural resources & better uses of natural resources & producing more goodsproducing more goods

Nations that invest in the health, Nations that invest in the health, education, & training of their people education, & training of their people will have a more valuable workforce will have a more valuable workforce that produces more goods & servicesthat produces more goods & services

People that have training are more People that have training are more likely to contribute to technological likely to contribute to technological advances, which leads to finding advances, which leads to finding better uses of natural resources & better uses of natural resources & producing more goodsproducing more goods

What are Capital Goods?What are Capital Goods?

All of the goods that are produced in the country and then used to make other goods & services Examples: tools, equipment,

factories, technology, computers, lumber, machinery, etc.

What are some capital goods used in our classroom?

All of the goods that are produced in the country and then used to make other goods & services Examples: tools, equipment,

factories, technology, computers, lumber, machinery, etc.

What are some capital goods used in our classroom?

How do Capital Goods influence Economic

Growth?

How do Capital Goods influence Economic

Growth? The more Capital Goods a country

has = the more goods & services they are able to produce

The US has superior capital goods.

The more Capital Goods a country has = the more goods & services they are able to produce

The US has superior capital goods.

What are Natural Resources?

What are Natural Resources?

All of the things found in or on the All of the things found in or on the earth; “gifts of nature”earth; “gifts of nature”

Examples: rivers, minerals, Examples: rivers, minerals, animals, plants, oil, timber, etc.animals, plants, oil, timber, etc.

All of the things found in or on the All of the things found in or on the earth; “gifts of nature”earth; “gifts of nature”

Examples: rivers, minerals, Examples: rivers, minerals, animals, plants, oil, timber, etc.animals, plants, oil, timber, etc.

How do Natural Resources Influence Economic Growth?

How do Natural Resources Influence Economic Growth?

Countries that have a lot of natural Countries that have a lot of natural resources are able to use them to resources are able to use them to produce goods & services cheaper produce goods & services cheaper than a country that has to import than a country that has to import natural resourcesnatural resources

Russia is rich in natural resources, Russia is rich in natural resources, but because of the harsh climate & but because of the harsh climate & size, it’s hard for Russians to get to size, it’s hard for Russians to get to them.them.

Countries that have a lot of natural Countries that have a lot of natural resources are able to use them to resources are able to use them to produce goods & services cheaper produce goods & services cheaper than a country that has to import than a country that has to import natural resourcesnatural resources

Russia is rich in natural resources, Russia is rich in natural resources, but because of the harsh climate & but because of the harsh climate & size, it’s hard for Russians to get to size, it’s hard for Russians to get to them.them.

What is Entrepreneurship?

What is Entrepreneurship?

It can be several things:It can be several things: Starting your own businessStarting your own business Inventing something newInventing something new Changing the way something was Changing the way something was

previously done so that it works previously done so that it works betterbetter

Can you name any entrepreneurs Can you name any entrepreneurs that you’ve heard of in the past?that you’ve heard of in the past?

It can be several things:It can be several things: Starting your own businessStarting your own business Inventing something newInventing something new Changing the way something was Changing the way something was

previously done so that it works previously done so that it works betterbetter

Can you name any entrepreneurs Can you name any entrepreneurs that you’ve heard of in the past?that you’ve heard of in the past?

How does Entrepreneurship

Influence Economic Growth?

How does Entrepreneurship

Influence Economic Growth? Entrepreneurship creates jobs Entrepreneurship creates jobs

and lessens unemploymentand lessens unemployment Encourages people to take risks, Encourages people to take risks,

and in doing so, they’ve created and in doing so, they’ve created better healthcare, education, & better healthcare, education, & welfare programswelfare programs

The more entrepreneurs a The more entrepreneurs a country has, the higher the country has, the higher the country’s GDP will be…country’s GDP will be…

Entrepreneurship creates jobs Entrepreneurship creates jobs and lessens unemploymentand lessens unemployment

Encourages people to take risks, Encourages people to take risks, and in doing so, they’ve created and in doing so, they’ve created better healthcare, education, & better healthcare, education, & welfare programswelfare programs

The more entrepreneurs a The more entrepreneurs a country has, the higher the country has, the higher the country’s GDP will be…country’s GDP will be…

How is Economic Growth Measured?

How is Economic Growth Measured?

Economic growth in a country is Economic growth in a country is measured by the country’s Gross measured by the country’s Gross Domestic Product (GDP) in one Domestic Product (GDP) in one yearyear

GDP = the total amount of final GDP = the total amount of final goods and services produced in goods and services produced in one year within a countryone year within a country

Economic growth in a country is Economic growth in a country is measured by the country’s Gross measured by the country’s Gross Domestic Product (GDP) in one Domestic Product (GDP) in one yearyear

GDP = the total amount of final GDP = the total amount of final goods and services produced in goods and services produced in one year within a countryone year within a country

Gross Domestic ProductGross Domestic Product

GDP is a domestic measurement GDP is a domestic measurement because it measures only what has because it measures only what has been produced within the country--been produced within the country--this doesn’t include products that this doesn’t include products that are imported.are imported.

It is much better for the economy of It is much better for the economy of a country to produce its own goods a country to produce its own goods and services (this increases the and services (this increases the country’s GDP).country’s GDP).

GDP is a domestic measurement GDP is a domestic measurement because it measures only what has because it measures only what has been produced within the country--been produced within the country--this doesn’t include products that this doesn’t include products that are imported.are imported.

It is much better for the economy of It is much better for the economy of a country to produce its own goods a country to produce its own goods and services (this increases the and services (this increases the country’s GDP).country’s GDP).

Gross Domestic ProductGross Domestic Product

Measuring the GDP each year Measuring the GDP each year can:can: Compare one country’s economy to Compare one country’s economy to

anotheranother Check a country’s economic Check a country’s economic

progress over timeprogress over time Show if the economy is growing or Show if the economy is growing or

not not

Measuring the GDP each year Measuring the GDP each year can:can: Compare one country’s economy to Compare one country’s economy to

anotheranother Check a country’s economic Check a country’s economic

progress over timeprogress over time Show if the economy is growing or Show if the economy is growing or

not not

Standard of LivingStandard of Living The higher a country’s GDP = a The higher a country’s GDP = a

better standard of living for the better standard of living for the people within the countrypeople within the country

In order for a country to have an In order for a country to have an increasing GDP, it must invest in increasing GDP, it must invest in human capital through education human capital through education & training, and it must produce & training, and it must produce goods that have value to be sold goods that have value to be sold within the country or exported.within the country or exported.

The higher a country’s GDP = a The higher a country’s GDP = a better standard of living for the better standard of living for the people within the countrypeople within the country

In order for a country to have an In order for a country to have an increasing GDP, it must invest in increasing GDP, it must invest in human capital through education human capital through education & training, and it must produce & training, and it must produce goods that have value to be sold goods that have value to be sold within the country or exported.within the country or exported.