Factors Affecting Economic Growth

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Malak Yasser March 7, 2015 ECOFIN What is economic growth and what affects it? Economic growth is an increase in the amount of goods produced per head of the population over a period of time. It is affected by many aspects under many circumstances. There are two types of factors which impact the economic development and growth in a country, they are economic factors and non-economic factors. First, economic factors include natural resources, technology, currency, and trade. Secondly, non-economic factors include human capital, social and political stability, and increase in GDP. The Gross domestic product (GDP) shows the health of a country’s economy. It is usually expressed as a comparison to the previous gain of the year. For example…show more content…
In fact, technology is one of the main economic factors that boost the economy. This is because technology is very efficient and provides a greater output by fewer resources over a shorter period of time. Producing advanced machinery helps rise production rates as well. Advanced machinery could have multiple functions and work longer hours. Adding to that, the value of the currency also influences economic growth. It is harder for countries who have weaker currencies import goods from countries who possess higher currency values. This brings us to the importance of the banking sector in economic growth. If banks lose money and no longer give loans, consumers are going to lose interest and stop investments. It is also very important for banks not to raise interest rates because as rates increase, investments decrease. Low interest rates encourages consumers to spend and invest their money. Furthermore, natural resources are an asset to any economy. Some of these natural resources include; oil resources, minerals, suitable climate, soil, and sources of water. The existence of the natural resources is very beneficial to any countries economy. A rise in commodity prices could also have a negative impact on economic growth. That’s why commodity prices have to be stable and…show more content…
Political instability could have a negative impact on the countries economy. For example, when Egypt was facing political instability, the economy fell. It only started rising again when political stability started reappearing. The overall atmosphere is also crucial. If laborers are working under negative conditions and a lot of stress, productivity will decrease. This is why it is very important to have a stable country with well-payed workers that are generally happy of their current statutes. The weather is also a working factor in economic growth. Extreme weather conditions could lead to a downfall in the economy. A decrease in the GDP happened in the United Kingdom a couple of years ago when it faced extremely cold weather

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