1. Causes of Economic Growth

2. Causes of Economic Growth
• Economic Growth doesn’t have a set
recipe.
• It is evident that different countries grow
at different rates and for different
reasons.
• Every country’s economy is built
differently

3. The Possible Causes
• Increase in Total Demand
– Can come from a number of sources
– However this is a short term cause as once an
economy is at full capacity no more can be
produced
• Improvements to the Labour Force
– Improvements to Quality and Quantity will
allow for long term economic growth through
a rise in productivity

4. The Possible Causes
• Progression in Technology
– As technology gets better, it can lead to an
economy being more productive which will
fuel economic growth
• Investment
– This would fuel economic growth but the
actual source of the growth would be from
new Capital Goods e.g. Machines

5. Capital Widening and Deepening
• Capital Widening: when investment rises
with the rise in the Labour Force
• Capital Deepening: when capital rises as
the Labour Force stays the same.
• It is said that Capital Deepening is the
most significant form of investment

6. Economic Growth Around the
World
• Different countries have different
circumstances which can effect economic
growth
• For example China and the UK have very
different economies

7. Difficult to Increase Growth
• Underdevelopment Trap
– This means low outputs lead to low wages
meaning a lack of savings, resulting in firms
find it difficult to invest so output stays low
• High Birth Rate
– Although the quantity of labour has now
increased the factors of production are
geared towards public services e.g.
Education & Health

8. Difficult to Increase Growth
• Debts
– Many poor countries have borrowed heavily
to finance output raising measures so are
constantly paying the Richer Nations
• Low income elasticity
– As products are mainly agricultural they do
not benefit from rising incomes in MEDCs