Economic growth


 

It is a steady increase in an economy´s ability to produce. Growth can happen by using resources more effectively, and increase the productive capacity of a nation.

The benefits and costs of economic growth

Benefits:

Cons:

 

Economic growth indicators

Gross domestic product (GDP) - represents the total value of goods and services produced by a given country in a single year, within the country´s borders.

GDP per capita is the total output of a country divided by the number of people living there.

When prices are rising during periods of inflation, GDP may increase even though the production of goods and services is unchanged. This is because GDP is measured in current prices. To avoid this, economists adjust the GDP, and the result is called the real GDP. It is expressed in constant euros.

 

GDP = C + I + G + (EX – IM)

C – consumers' expenses on consumers goods and services. (It makes about 65% of GDP)

I – investments and all business spendings. (It makes about 20% of GDP)

G – the government spending and investments including transfer payments.

EX – IM means net export.

 

Gross national product (GNP) represents the total value of final goods and services produced by resources owned by the nation within and outside its borders.

Prosperity can also be measured in terms of Gross National Income (GNI). This is money coming into a country from investments abroad, minus money leaving the country to go to investors from abroad.

GDP does not include the following:

The Organisation for Economic Co-operation and Development

OECD is an international economic organisation founded in 1961 to stimulate economic progress and world trade. It is a group of countries committed to democracy and market economy, they seek answers to common problems and co-ordinate domestic and international policies. Most OECD members are developed countries with high-income economies. Slovakia became a member of OECD in 2000.

 

Goals of OECD: