Macroeconomics and business

presentation
by
group10
of
group 2
topic: ECONOMIC GROWTH
LECTURER: MRS. LORDINA AMOAH

GROUP 10 OF GROUP 2

ECONOMIC GROWTH
an

increase in a countrys productive

capacity as measured by comparing
Gross National Product (GNP) in a
year with the GNP with the previous
year.

GROUP 10 OF GROUP 2
2

BENEFITS OF ECONOMIC GROWTH

Economic growth is beneficial in the following ways:

1.

improvement in the living standards: this is as a result of a

rise in the per capita income levels.

2.

The accelerator effect of growth on capital investment is

another benefit.

3.

Has a positive impact on profits and business confidence. A

growing economy boosts tax revenue and generates the
money to finance expenditure on public and merit goods
without having to raise tax rates

GROUP 10 OF GROUP 2
3

EFFECTS OF ECONOMIC GROWTH

Economic

growth can affect the economy by:

1.

creating negative externalities

2.

increasing the consumption of de-merit goods

which damage social welfare

3.

leading to an increase in over-population,

especially in urban areas putting pressure on
scarce land and resources.

GROUP 10 OF GROUP 2
4

REAL GDP PER CAPITAL GROWTH

Real GDP per capital is a measurement of the total economic

output of a country divided by the number of people and
adjusted for inflation

This economic indicator has three important concepts

1.

Gross Domestic Product (GDP)

2.

Real GDP

3.

Per Capita

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5

Calculating real gdp per capita

If you already know real GDP (R) then you just divide it by the population
(C):

R/(C )= real GDP per capita.

If you don't know real GDP, you can calculate it from nominal GDP (N) if
you know the deflator (D). This is simply the ratio of what it goods and
services would cost today if there had been no inflation since the base
year.

Here's the formula to calculate real GDP per capita (R) if you only know
nominal GDP (N) and the deflator (D): (N x C)/D = real GDP per capita.
The BEA takes out inflation by calculating the implicit price deflator.

GROUP 1O OF GROUP 2

LIMITATIONS TO ECONOMIC
GROWTH

Differences in currencies: due to currency differences, there is

the difficulty in comparing National income of different countries
and hence the capita income.

Inaccurate statistical data: the computation and the estimation of

national income encounters the problem of inaccurate statistical
data for various reasons, therefore the capita income maybe
inaccurate and so cannot adequately measure standard of living.

Differences in composition of national output: since the

composition of national output of different countries may differ,
we cannot conveniently use real GDP per capita to measure and
for that matter compare standard of living.

GROUP 10 OF GROUP 2

SOURCES OF GROWTH
Availability

of land (natural resources) is vital for economic

growth. The exploitation of natural resources may contribute
the growth of the country.

An

increase in the size and improvement in the quality labor

force is also a source of economic growth.

Increase

in technical knowledge is the most important cause of

economic growth. Improvement in technology leads to
improved ways of doing things and getting work done and
changes in organization and methods of production. All these
changes increase economic growth by increasing the scale of
production and hence reducing the average cost of production
as economies of scale are reaped by the firms.

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8

H
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