What is Economic Growth?

Economic Growth is the increase in income or the value of goods and services generated in the economy of a country or region in a given time, which measure in years.

Economic Growth observes when the indicators of production, energy consumption, savings capacity, investment, and consumption of services, among others, increase, which together make up the country’s income and, in theory, reflect an increase in the population’s quality of life.

It is essential because it is directly related to its GDP (Gross Domestic Product). In other words, as it is a factor associated with the economic well-being of citizens, use is made of the data it yields to determine the measures for the socioeconomic improvements of a country.

However, economic Growth can generate in the short or long term. When it estimates quickly, reference is being made to an economic cycle effect by various causes such as a recession, increases in oil price, loss of crops, and others.

Characteristics of Economic Growth

The main characteristics that reflect economic Growth are presented below.

  • Increases the percentage of total productivity in the various work areas.
  • Economic Growth is observable and measurable.
  • It positively affects the growth of per capita income.
  • It reflects the increase in a country’s population—the more significant number of people.
  • Increases the consumption and sale of goods and services.
  • The number of jobs is increased.
  • People have a greater capacity to save.
  • More excellent investment in various productive sectors.

Theory of Economic Growth

The economic studies that have tried to define this phenomenon are included in the theory of economic growth and focus on analyzing the improvements experienced by economies in a given number of years, which usually tends to extend over the long term. For a short time, there was the business cycle theory.

Through the study of economic growth, many other aspects of the productive life of an economy observe, focusing on its adequate level, the quality of education provided to its citizens, its mortality and birth rates, or life expectancy in its population region. On the other hand, this type of Growth is usually identified as success or not, as in the case of economic recessions (where there is a decrease in economic activity for some time) and the economic policies practice by countries of the world based on the assumption that if the income of a country increases, so will the well-being of its citizens.

Factors of Economic Growth

In centuries of economic study, different models of economic growth and its causes have developed. These are helpful simplifications of reality to seek explanations about how economies grow and the reason for their changes. The general idea that can be drawn from them identifies certain factors as key to economic Growth:

Investment in the capital: Key for workers to carry out their productive work in better conditions and with the help of more tools.

Education: Or what is the same, the investment in human capital that provides the participants in the production process with a preparation that helps them increase their production with the same resources and be more effective.

Technology is important because it facilitates the evolution of work models, tools, production, and research.

Types of Economic Growth

A country or region can go from economic Growth to decline in years since they are compulsory subjects of the economic cycle. The effort or the macroeconomic policies carried out by governments to maintain are not always usually sufficient since a country without natural resources, financial capital, and human capital cannot sustain a positive balance. For this reason, this is generally divided into:

Short term growth: It is the type of economy that is the main character by obtaining positive balances for less than ten years; the countries that present this type of economic growth tend to have a high average age of the population, a low birth rate and generally face political instabilities that delay or slow economic growth.

Long-term growth: It is the type of economic Growth that character by having a stable development for more than ten years; the countries that present this usually have abundant natural resources, fertile land, a low average age of the population, and generally have healthy political stability.

Models: Although there are various economic growth models to synthesize, only the study and analyzed models will be present.

Harrod-Domar Model: The present model inspires or base on Keynesianism and is mainly intereste in situations where there is a deviation from the point of full employment and the economically active population.

Solow Swan model: The present model pursues or is towards a neoclassical production function and considers technological progress. Of the models mentioned, indeed, the best-known model.

Factors Involved In Economic Growth

Several factors influence and directly affect the economic growth of a nation; among them, we can mention:

Capital investment: this investment has to do with everything related to the conditioning of infrastructures, tools, and equipment and improving working conditions where the production and distribution of goods and services occur.

Education: having people traine in academic and technological matters, plus a quality workforce in various work areas, will result in better quality and competitiveness in the national and international market.

Technology: it is a tool that has made it possible to improve production channels, quality, and percentage of work. In other words, it produces in greater volume and with better final quality.

What Does This Growth Depend On?

This economic growth in a country may be due to various factors, such as technological progress, investment, or the accumulation of capital (both physical and human).

The most crucial factor for this Growth will be the productivity of goods and services using the same number of resources. This achieves by applying the latest technology in production processes and obtaining better-quality workers. However, this will not only depend on the companies that want to invest in these processes but also on the workers who will have to invest in this higher qualification.

But since there are risks that this union does not know about, it would be necessary to have the figure of the State. This will reduce the risks between employers and workers to acquire greater production capacities, generating public goods. It uses the whole society, increasing productivity within a regulatory and adequate framework.

Investment in Economic Growth

The investment factor groups and measures the quantity and quality of capital investment available in a country or region. These capital investments favor real progress since it maintains a dynamic, leveraged, and liquid economy.

Culture of Economic Growth

The cultural factor analyses the Growth in a given period of the variables related to the effort or expense incurred by governments to improve aspects inherent to education, laws, sports, scientific research, and preservation of customs.

The Technology of Economic Growth

The Technological Factor contrasts the results and the investment made by governments in technological matters; a nation with stable economic Growth generally denotes a sound investment. In the technical field since it allows better productivity and quality of products and services.

Production and Trade

The economic growth of a nation or area defines by commercialization and production. Its goods allow them to have stable income over time; therefore, the ‘Production and trade’ factor measures the payment. And data related to the production. And commercialization of specific goods or commodities that “sustain” or form the basis of Growth.

Measurement of Economic Growth

The Measurement mentioned above exposes the increase or increase experienced by a country or region based on specific macroeconomic indicators; the most common are GDP, GNI, CPI, and two real examples of certain countries.

Examples of Economic Growth

The following example shows the existing variation of the ‘GDP’ registered in Latin America in the last decades. Focusing on the country of Chile, it can see that there is a long-term economic of the gross domestic product. However, the growth percentage increased and decreased over the years; it remains a positive variable.


Economic Growth understands as a positive evolution. Of the living conditions of a specific territory, Which will measure in terms of income. And productive capacity in a given period.

However, Income includes savings or investments of individuals, trade balance, etc. The indicator that will show this will be a country’s GDP (Gross Domestic Product). To define this phenomenon, it is necessary to study the short-term economic cycle and observe it it.

Moreover, Suppose there are improvements in that country’s economy over several years. The variables that will have kept in a country will be its level of consumption. Its investment, the execution and control of public spending, and the relationship between exports and imports.

When the wealth of a country increases, that is to say, the GDP, it will reach Economic Growth. To give way to Economic Development later.

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