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Kari Whitehead
Professor Green
Principles of Macroeconomics
9 March 2020
Economic Growth
Economic growth is an increase in the amount of production of goods and services in an
economy. It is normally measured in terms of an increase in the aggregated market value of
goods and services that are additionally produced. Gross national product (GNP) or gross
domestic product (GDP) is the usual term that economic growth is measured; however, there are
other alternative metrics that are sometimes used. There are numerous factors that affect
economic growth. Natural resources, physical capital or infrastructure, population or labor,
human capital, technology, and law are six factors that can affect growth in the economy.
To begin, one factor of economic growth is natural resources. Natural resources are
materials and substances that develop and occur naturally in the environment. Types of natural
resources, such as water, air, coal, oil, natural gas, land, types of minerals, etc., can boost
economic growth as a country’s production rates shift or increase. Since it is nearly impossible to
expand the number of natural resources a country has, countries have to balance out the supply
and demand on certain products in order to prevent that natural resource from being depleted.
One way to help is taking care of the land. Improving the maintenance of the land could help
improve the quality of the land, which contributes to economic growth. There are two main types
of natural resources: renewable resources and non-renewable resources. Non-renewable
resources are resources that can only be used once. They diminish in the quantity; therefore, it is
important to use these in a wise manner so they do not disappear altogether. Examples of some
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of these non-renewable resources are coal, petroleum, natural gas, etc. Renewable resources, on
the other hand, can be restored. Wind, sunlight, ect., are some of the renewable resources that are
available everywhere and anytime; however, there are some renewable resources that take time
to restore such as water and timber. With an abundance of natural resources, the development of
economic growth increases. Another example of economic growth is physical capital and
infrastructure. An expansion in the investment of capital, such as roads and factories, helps lower
the cost of activity in the economy. Factories are much more productive than the physical labor
of humans. The higher the productivity and physical capital, the more increase in the output.
Physical capital affects economic growth in two different ways: an increase in the quantity of
physical capital and an increase in the quality of physical capital. Both ways show that the
investments made give rise to a higher production rate for the future. The third example of
economic growth is an increase in population and in labor. The bigger a population gets, the
more demand there is for jobs, which increases the number of workers and employees a business
needs and hires. However, in some cases when there is a big population rise, like the baby
boomers of early to mid-1900s, unemployment starts to increase because there are too many
people for a business to pay and keep their business afloat. Since an increase in population can
cause two different and drastic scenarios, it is seen as both a positive and negative effect on the
growth of the economy. Human capital, contrary to physical capital, can enhance the quality of
the workforce with the investments made. Workers with certain skill sets have an important role
in economic growth because those workers are more productive than having more general
workers who are not specialized in a certain category. Jobs would not be getting done with the
precision that a skilled worker would have. Technology is another example of economic growth.
Technology is constantly changing and improving, which expands the productivity of the
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workforce, giving more people jobs. This gives rise to a higher production rate which in return
boosts the growth and development in the economy. However, with the enhancement of
technology, unemployment is constantly hovering over most workers in the labor force. In
factories, the production of goods are being made and delivered at lower costs, but that comes
along with the fact that factories are replacing workers with machines. Machines have the ability
to complete tasks at a quicker and more precise pace than workers do; therefore, unemployment
among certain workforces in rising. Even though there will be unemployment, technology will
help advance economic growth in the long run because of the mass production and lower costs
that simulate from the constant improvements. The last example of economic growth is the law.
The rule of law in economics is an outline that manages the activities that happen in the
economy.
In conclusion, natural resources, physical capital or infrastructure, population, human
capital, technology, and law are a few of the numerous effects of economic growth. Each topic
has a specific and important role in playing a positive or negative effect on the growth in the
economy.
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Works Cited
Learning, Lumen. “Macroeconomics [Deprecated].” Lumen,
courses.lumenlearning.com/macroeconomics/chapter/components-of-economic-growth/.
Prateek Agarwal. “Economic Growth.” Intelligent Economist, Prateek Agarwal, 9 Feb. 2020,
www.intelligenteconomist.com/economic-growth/.