Question

1. Why is economic growth important? 2. Describe the difference between economic expansion and long-run economic growth. Page 7 3. Describe the difference between growth that occurs as a result of an increase in inputs and growth that occurs as a result of an increase in output per input. 4. How do the following institutions promote growth? o Property rights Competitive markets o Efficient financial institutions

Answer 1

1)

Economic growth refers to a sustained rise in the production of goods and services. When there is economic growth, it means now more goods and services are available for consumption. Thus, it increases the living standard of people of the country. Thus, all economies strive to raise the level of growth so people of society can be made more prosperous and happy.

Answer 2

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1.

Economic growth refers to the sustained increase in output of goods and services produced in an economy, using the given resources.

Higher economic growth means more goods and services are being produced in the economy and thus the country is experiencing higher GDP. With more goods and services produced, consumer consumption demand and incomes would also increase, thereby benefitting the economy as a whole.

Higher output also means higher exports and export income.

Higher GDP also helps increase consumer as well as investor confidence, thereby increasing the overall economic conditions of the country, and making it a good performer in the international markets.

This makes economic growth very important for countries.