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Types and factors of economic growth are very important in order to explain why one state is growing faster than the other, understand what you need to do in order to ensure that growth was faster , as well as understand how to determine the growth rate of gross domestic product . The growth of production capacity can affect the quality and quantity of resources. Consequently, we can distinguish two types of growth : intensive and extensive . When economic growth driven by increasing the amount of resources , it can be attributed to the extensive form. When economic growth is improving the quality of resources , such growth can be attributed to the intensive .
Given that economic growth is divided into two types , it is possible to identify the main groups of factors that relate to the type of economic growth :
1) Resources
2) Capital
3 ) Technology
Thus, we can say that the standard of living in a particular country depends on how its economy is capable of producing goods and services. In turn, the performance is directly dependent on how human capital has state what he reserves of natural resources, and what is the level of technological knowledge in the country. However, economic growth has both its benefits and costs.
Economic growth alone cannot solve a number of social, economic or purely economic problems. These disadvantages are sacrifice current consumption . That is, to the future growth of the economy was achieved , you have to sacrifice consumption in the present. At the heart of economic growth is investing . The main problem here is . We have to choose between the future and the present. Of course , on the one hand lead to that the amount of resources consumed by the production decrease. However , based on the investment savings are . They , in turn, are an integral part of income. Therefore, in order to increase investment to generate more income in the future , will have to cut costs in the present.
Another problem , which can be viewed in economic growth is to reduce the efficiency of investments with the passage of time . This happens to the extent that it reduces the extra output of goods and services. This is due to the fact that the so-called reduced returns on investments . In view of this , with higher levels of investment , the returns will be very short-lived, however, as a whole, economic growth will slow down the accumulation of capital.
The result is that an increase in savings can give only a temporary effect of economic growth and still lead to its slowdown . If we consider the long-term , increased investment will increase the amount of goods and services , but it will not mean an increase in the growth rate of the economy. And to achieve growth rates can only be achieved through the modernization process . Besides, taking into account the fact that over time the return on investment is becoming less important , it can be argued that their growth in emerging economies will lead to a greater acceleration of economic growth than in developed economies . This phenomenon can be called the effect of the quick start .
It should be noted that in the advanced economies, technical equipment is at a very high level. This means that even with a significant level of investment , productivity growth remain small . From this we can conclude that with equal share of gross domestic product , which is directed to invest in countries with less developed economies growth rates are faster than in countries with more developed economies. As an example, the situation in Korea and the United States. Investing in these countries in the economy was about the same level . Nevertheless , GDP growth in South Korea was six per cent , while in the U.S. only 2 .
The Great Recession
The global financial crisis ( sometimes called the " great recession ") is a financial and economic crisis , manifested in September - October 2008 in the form of a significant deterioration in the main economic indicators in most developed countries , and the subsequent end of the same year the global recession .
In 2008, the crisis has been global in nature and began to emerge in the wide decrease in production volumes, lower demand and prices for raw materials , rising unemployment .
The emergence of the crisis associated with the following factors:
- general cyclical economic development;
- imbalances in international trade and capital movements.
- overheating of the credit market and especially manifested its consequence of the mortgage crisis;
- credit expansion, launched in the 1980s - early 2000s.
And also:
- high commodity prices (including oil);
- overheating stock market.
According to Trading Economics, the GDP growth rate in the third quarter of 2013 is 2.8% compared to -2.7% in the third quarter of 2008.
According to the U.S. Financial Calculator, the latest annual inflation rate is 1% in October 2013 compared to 0.1% in the third quarter of 2008
According to the U.S. Bureau of Labor Statistics, the Unemployment rates were the following:
In September-October 2008 it was at 6.1-6.5 percent and increased to 10% in 2009. Now the unemployment rate is 7.3%
Taking into consideration all information above, we can conclude, that the U.S. Economy has begun the slight growth. The economics have numerous weaknesses now, but we are not in crisis like it was in 2008.
Works Cited
Peter J. Wallison, "Cause and Effect: Government Policies and the Financial Crisis," (Washington, DC: American Enterprise Institute, November, 2008.
The Bureau of Labor Statistics. Retrieved 25 November 2013.
Trading Economics. www.tradingeconomics.com. Retrieved 25 November 2013.
