In the world of economics, economic growth is considered to be one of the reliable signs of the nation's overall progress. Contrary to popular belief, the importance of this concept goes well beyond the economy of a nation. Employment and production are the two determinants of economic growth, and both have a crucial role to play for you as an individual. Everything works on the simple logic that more commerce will result in more jobs, more job will result in more consumption and more consumption will result in more production - which will again generate more jobs. While the cyclic manner in which all these things work may seem simple, there is lot more to know about it - especially how it affects your personal life.
Meaning of Economic Growth
In economics, the term 'economic growth' refers to the tool which determines the overall progress of the said economy by taking into consideration the total amount of production of goods and services in the country over a stipulated period. Even though the concerned authorities keep a track of these developments on a daily basis, it is the quarterly or yearly figure which plays an important role in determining whether the country is headed to. Many sources define economic growth as the steady growth in the productive capacity of the economy or an increase in any measure of aggregate income such as the per capita Gross Domestic Product (GDP). One should also take into consideration the fact that economic growth can be positive as well as negative. (The term economic growth is used even where the GDP decreases resulting in contraction of economy.) Interestingly, when an economy is experiencing negative growth, it is said that the economy is shrinking.
As we mentioned earlier, the economic growth measured over a quarterly or yearly basis is what is given the utmost importance when monitoring the progress of the nation. It is generally measured as the rate of change in real gross domestic products (GDP.) There are two methods by this change can be measured - nominal terms (which includes inflation) and real terms (wherein the figure is adjusted for inflation.) If the GDP of a said economy increases from US$100 billion in the previous year to US$120 billion this year, the country is said to have experienced an economic growth of 20 percent. While that is an example of positive growth, an example of negative growth would be the decrease of GDP from US$100 billion to US$85 billion - which means that the country has experienced a negative growth of 12 percent. Such negative growth, especially when experienced over two quarters, is associated with economic recession in the country.
Factors Affecting Economic Growth
An economy is subjected to cycles of economic growth - both positive and negative, owing to various underlying factors. These factors range from the market condition in a country to some event of global importance. For instance when interest rates go up, it deters the consumers from buying those goods - and this, in turn, affects the production of goods and economic growth of the economy in question. Similarly, government regulation on industries can also affect the production of goods and affect the growth. Overall economic condition prevailing in the country or the world for that matter can also affect economic growth. It has been observed time and again in the whole world, including the US economy as well, that an economy which has just come out of recession is defensive when it comes to overall consumption. People are afraid to spend and inclined to save money for bad times. This lack of interest in spending affects the production of goods and results in domino effect on the economy.
Even though you as an individual may not be keen on the production aspect of this economic concept, the employment aspect is bound to grab your attention from the word go. At the end of the day, all the factors affecting economic growth work together for smooth functioning of the economy and fluctuation in any of these factors can result in some serious implications on the economy as a whole.
0 komentar:
Posting Komentar