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Factors that Influence Economic Growth

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Economic Growth FACTORS THAT INFLUENCE ECONOMIC GROWTH Factors That Influence Economic Growth All countries want economic growth. Several factors influence a country ... – PowerPoint PPT presentation

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Title: Factors that Influence Economic Growth


1
Economic Growth
  • Factors that Influence Economic Growth

2
Factors That Influence Economic Growth
  • All countries want economic growth.
  • Several factors influence a countrys economic
    growth.
  • One is its ability to invest in human capital.
  • Another is the investment made in capital goods.
  • Still another factor is the natural resources
    available.
  • Entrepreneurs are an economic factor as well.

3
Economic Growth Factors Human Capital and Gross
Domestic Product
  • Human Capital refers to investments in the
    welfare and training of human workers.
  • Providing for employees health care or education
    are investments in human capital. So are
    programs to improve peoples job skills.
  • Investment in Human Capital usually produces a
    healthier, more satisfied, more productive
    workforce.
  • More developed nations often invest more in Human
    Capital than the less developed nations do.

4
Economic Growth Factors Human Capital and Gross
Domestic Product
  • Gross Domestic Product (GDP) is defined as The
    value of all the goods a nation produces in a
    year.
  • The more human capital a nation has, the higher
    its GDP tends to be.
  • For example, healthier and more educated/skilled
    workers (Human Capital) results in more
    productivity , which then results in a higher
    Gross Domestic Product (GDP).
  • When countries use resources to help its people,
    they are investing in human capital.

5
Economic Growth Factors Capital and Gross
Domestic Product
  • Capital goods are human-made resources that are
    used for production (factories, machinery, and
    technology).
  • The more a country invests in capital goods, the
    higher its Gross Domestic Product (GDP) tends to
    be.
  • Again, a nations GDP is equal to the value of
    all the goods it produces in a year.
  • The Gross Domestic Product is lower for command
    economies due to the setbacks of being under
    communism and a command economy.

6
Economic Growth Factors Natural Resources
  • Natural resources also affect economic
    development.
  • Oil is a valuable natural resource.
  • So are precious metals and various other
    resources.
  • Nations rich in natural resources can produce
    revenue (money).
  • Certain nations might allow foreign investors to
    enter their country to mine, drill, and extract
    certain resources in exchange for money that
    helps the countrys economy.
  • Foreign investments produce a great deal of
    wealth and help economies develop.

7
Economic Growth Factors Natural Resources
  • Abundant natural resources increase a countrys
    Gross Domestic Product (GDP).
  • Natural resources impact industry and trade.
  • The more natural resources nations have, the more
    their industries and manufacturing tend to
    develop, thus resulting in a higher Gross
    Domestic Product.

8
Economic Growth Factors Entrepreneurs
  • Entrepreneurs are people who start and own
    private businesses.
  • They contribute to economic development.
  • Nations with free-market economies encourage
    entrepreneurship since those nations need
    privately owned businesses to strengthen the
    economy.
  • Entrepreneurship is important to economic
    development.
  • Entrepreneurs often improve and increase
    production.

9
Economic Growth Factors Entrepreneurs
  • Entrepreneurship creates market competition
    (competition between private businesses).
  • Competition tends to inspire innovation (new and
    better ways of doing things) and invention (new
    technology and products).
  • Innovation and invention lead to economic growth
    because they often produce profits, more jobs,
    and economic development.

10
Economic Growth Factors Entrepreneurs
  • Where entrepreneurship is discouraged, people
    receive fewer financial rewards for new ideas.
  • Less incentive exists for people to invent things
    or be innovative.
  • Usually countries that do not encourage
    entrepreneurship may not be highly developed and
    also may have a lower Gross Domestic Product
    (GDP).

11
Economic Growth Factors Entrepreneurs
  • For many years, western European economies have
    encouraged entrepreneurship.
  • More and more eastern European nations have
    encouraged entrepreneurship since the fall of
    communism.
  • They recognize that entrepreneurship is key to
    improve their nations economies.
  • Abundant natural resources and entrepreneurship
    increase a countrys Gross Domestic Product (GDP).

12
Enduring Questions From This Presentation
  • 1. What is the relationship between human
    capital, capital investment, and gross domestic
    product (GDP)?
  • 2. What is an entrepreneur?
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