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Economic Growth Definition: Economic growth refers to an increase in a country’s ability to produce goods and services. The advantage of economic growth is that an increase in real national income allows more goods for consumption, Barriers to economic growth ‘A country can increase production if its increases the amount of resources used or makes better use of existing factors. Economic growth is more difficult if countries encounter the following problems: i) A country lacks the infrastructure to produce goods more efficiently. There are three types of infrastructure: a. Basic including electricity, road and telephone networks; b. Social including schools, hospital and housing. ¢. Industrial including factories and offices. ii) A country lacks the machines or skilled labour needed to manufacture modem goods or services. iii) A country lacks the technical knowledge iv) Workers are not prepared to accept specialization and the division of labour. ¥) Population growth is too rapid. vi) A country has too large of foreign debt. Factors cont 2 to economic growth A country can increase its total output of goods and services by - using more land, labour and capital, and - using its land, labour and capital more efficiently. Capital In alll countries which have high growth rates, a large amount of government spending is allocated towards capital stock. An increase in capital equipments would result in increases in productivity, Land In agricultural countries, land is obviously a most important resource. In these countries, investment in drainage, irrigation and fertilizers the use of more efficient farm implements and improvements in transport can increase both the area of cultivated land and its quality. In industrial countries, the supply of land is less important source of economic growth, Mobility A country’s rate of economic growth depends very much on its willingness and ability to shift its economic resources from declining and low growth industries to industries which have better prospects of growth. Countries which have achieved high rates of growth have been able to introduce new products, new designs and new production methods, new designs and new production methods more quickly than other countries. ‘Technical knowledge ‘A most important cause of economic growth is the increase in technical knowledge. This takes many forms, such as invention, improvements in the design and performance of machinery, the development of new materials, and changes in the organization and methods of production. For example suppose a machine is replaced by one which is much more advanced in design and much more productive. In this case, the increase in output is not due to any change in the capital stock but to an increase in technical knowledge. Cost of economic growth Increased noise, congestion and pollution ‘Towns and cities may become overcrowded Extra machines can be produced only by using resources currently involved in making consumer goods * A traditional way of life may be lost. ‘* People may experience increased anxiety and stress. * Also Read on Stanlake Pg 240 - 242