The Benefits and Costs of Economic Growth
Define the sources of economic growth and give an example of each of the sources of growth.
2. Propose one policy for each source of growth that could enhance or strengthen that source.
3. What are some of the downsides of economic growth? Give an example of a policy that would help to reduce the negative impacts of growth.
4. Finally, at the conclusion of your paper please include a brief statement reflecting on what you feel you have learned from the assignment and how that learning may be applied to your life or work going forward.
Sample Solution
Economic growth is an increase in a country’s production of goods and services, which generally leads to improved living standards. There are three sources of economic growth: increases in productivity, population growth, and capital accumulation.
Productivity refers to the amount of output produced per unit of input (DeLong & Summers 2012). A policy that could enhance this source would be investing in research and development (R&D) as it can lead to technological breakthroughs that allow firms to produce more with fewer inputs. For example, increased investment in R&D could bring about better machinery or software that enable workers to produce more with fewer resources consumed.
Population growth describes how a nation’s total population affects its economic output (DeLong & Summers 2012). Policies such as offering tax incentives for businesses who hire new employees can help stimulate population growth by creating jobs for previously unemployed individuals. Additionally, educational initiatives aimed at improving workforce skillsets may also lead to higher economic output due to an influx of well-trained laborers.
The final source is capital accumulation—the process whereby businesses purchase additional physical assets like equipment or buildings that can improve their productivity (DeLong & Summers 2012). Enhancing this source might involve implementing macroeconomic policies such as cutting interest rates so firms have access to cheaper financing when looking for investments opportunities.
