What is the rate of economic growth

Economic growth

Economic growth (in English: Economic Growth) is the increase in the rate of production capacity in a country, and growth is measured by comparing the gross national product during the current year, with the gross national product in the previous year, and there are a group of main factors for increasing economic growth, the most important of which is technological progress, Increasing capital, and other factors, and increasing productivity lead to higher corporate profitability, and an increase in stock prices; Which contributes to providing suitable capital for investment, and attracting more employees with a view to employing them. As a result of the increase in the number of job opportunities. Economic growth is one of the important indicators in the economy sector, and it is used to measure the total value added to all working productive units, within all branches of production in a specific economic sector, such as industry and agriculture.

The rate of economic growth

The economic growth rate (in English: Economic Growth Rate) is the rate during the year at which the income of a particular industrial sector or a country increases, and when this rate changes due to the effect of inflation, its name becomes real economic growth. Economic, and the economic growth rate is defined as a measure used to measure the growth of the economy between various periods of time; In terms of the use of percentages, it is also a measure of the percentage of changes affecting the country's gross domestic product from one year to the next.

Calculating the rate of economic growth

The calculation of the economic growth rate depends on studying the apparent changes in the value of the gross domestic product over the years. Below is information on the method of calculating the economic growth rate:

Economic Growth Rate Calculation Law: It is the difference between the new GDP and the old GDP, divided by the old GDP, and GDP is generally represented by the symbol (GDP); It is an abbreviation of the English term Gross Domestic Product, and is expressed in the following equation:

Economic Growth = GDP₂ GDP₁ / GDP₁

Interpretation of the law: The rate of economic growth is equal to the subtraction of the new gross domestic product (GDP).₂) of the old Gross Domestic Product (GDP₁), divided by the old gross domestic product (GDP₁).

Example: If the GDP rate increased from 3% in 2016 AD to 6% in 2017 AD, what is the rate of economic growth?

The solution: By applying the previous law, the economic growth rate is obtained, according to the following: 6% - 3% / 3% = 1% economic growth rate.

factors affecting economic growth

Economic growth has several factors, including:

• Human Resources: It is one of the most important factors leading to increased economic growth. The quantity and quality of human resources contribute directly to the economy, and the quality of human resources depends on a set of characteristics, the most important of which is their ability to create, educate, train, and skills. In the event of a shortage of skilled human resources, this leads to impeding economic growth.
• Natural Resources: It is one of the factors that greatly affect the economic growth of a country, and it includes all the natural resources that appear on or inside the earth’s surface, such as plants on land, water resources, and other landscapes. As for the natural resources inside the earth, known as underground resources, they include Gas, oil, minerals, and natural resources vary between countries based on their environmental and climatic conditions.
• Capital Formation: It is called all products that are produced based on human industry, and it also includes many components, such as machinery, land, transportation, and energy.
• Technological Development: It is one of the important and influencing factors in economic growth, and it includes the application of a group of productive techniques and scientific methods. Technology is defined as the nature and quality of technical tools, which depend on the use of a certain percentage of the labor force.
• Social and political factors: They are the factors that aim to provide an important role in the economic growth of countries, and each of the traditions, customs and beliefs constitute the social factors, while the government's participation in policy development and implementation constitutes the political factors.

benefits of economic growth

Economic growth contributes to providing many benefits to the economy sector, the most important of which are:

• Increasing the available quantities of services and goods for individuals in the community.
• social welfare support; By contributing to production support, increasing salary rates, and profits.
• Assistance in reducing poverty, improving the educational level, and health care for individuals.
• Increasing the value of national income and increasing the resources of states, and this leads to supporting the ability of states to implement all their responsibilities, such as providing education, health, and security; It also helps distribute national income in the best possible way, without negatively affecting consumption.
• Contribute to reducing the problem of unemployment.

burdens of economic growth

Achieving economic growth is accompanied by problems, including:

• An increase in the rate of economic growth leads to an increase in the need for the production of capital goods, and then directing investments and resources to them, with an interest in raising investment in both education and training. Which leads to the sacrifice of some consumer goods at the present time; In order to support future production.
• The emergence of environmental pollution and crowded cities; Resulting from the impact of economic growth, whether in developing or developed countries.
• lack of stability in the economic sector; As a result of the emergence of clear fluctuations in economic activities such as unemployment and others, and this is associated with the occurrence of economic growth in an unstable manner.