Four Factors of Economic Growth

What do they have in common?

How is Economic Growth Measured? Economic growth in a country is measured by the country’s Gross Domestic Product (GDP) in one year

Gross Domestic Product GDP is the total value of all the goods and services produced in that country in one year Tells how rich or poor a country is Shows if the country’s economy is getting better or worse The raising of a country’s GDP, the better the country’s standard of living.

  Ranking Economy US dollars) USA 1 United States 16,800,000 CHN 2 China 9,240,270 JPN 3 Japan 4,901,530 DEU 4 Germany 3,634,823 FRA 5 France 2,734,949 GBR 6 United Kingdom 2,521,381 BRA 7 Brazil 2,245,673 RUS 8 Russian Federation 2,096,777 ITA 9 Italy 2,071,307 IND 10 India 1,876,797 CAN 11 Canada 1,826,769 AUS 12 Australia 1,560,597 ESP 13 Spain 1,358,263 KOR 14 Korea, Rep. 1,304,554 MEX 15 Mexico 1,260,915 IDN 16 Indonesia 868,346

Standard of Living Standard of living- The quality of life of the people within a country The higher a country’s GDP, the better quality of life – standard living increases

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Standard of Living In order for a country to have an increasing GDP, it must invest in human capital through education & training, and it must produce goods that have value to be sold within the country or exported.

4 Factors of Economic Growth There are four factors that determine a country’s Gross Domestic Product for the year: Natural Resources Human Capital Capital Goods Entrepreneurship

Natural Resources “Gifts of Nature” Without them, countries must import the resources they need……and this is costly!

Natural Resources Countries that have a lot of natural resources are able to use them to produce goods & services cheaper than a country that has to import natural resources Many natural resources? Trade them with other countries and make money for the economy!

Human Resources/Human Capital Value that humans bring to the marketplace education, training, skills, and healthcare of the workers and the value that they bring to the country’s economy Examples: computer/reading/writing/math skills, talents in music/sports/acting, ability to follow directions, ability to serve as group leader & cooperate with group members A country’s literacy rate impacts human capital the percent of the population over 15 that can read/write

Why invest in developing human capital/human resources? Countries will have a more valuable workforce that produces more goods & services. People that have training are more likely to contribute to technological advances, which leads to finding better uses of natural resources & producing more goods

Capital Goods Capital goods are all of the factories, machines, technologies, buildings, and property needed by businesses to operate. Examples: tools, equipment, factories, technology, computers, lumber, machinery, etc.

Why invest in developing capital goods? More capital goods= the more goods & services they are able to produce = the more money they can make!

The Role of Entrepreneurship People who take the risk to start and operate a business are called entrepreneurs These people risk their own money and time because they believe their business ideas will make a profit Entrepreneurs must organize their businesses well for them to be successful They bring together natural, human, and capital resources to produce foods or services to be provided by their businesses

How does Entrepreneurship Influence Economic Growth? Entrepreneurship creates jobs and lessens unemployment Encourages people to take risks, and in doing so, they create better healthcare, education, & welfare programs The more entrepreneurs a country has, the higher the country’s GDP will be…

Let’s review our Economy Vocab! Please take out you economics vocab list (Back side of 4-square notes on types of economy.) How many more words can you define? I count at least 10 words you need to define from your notes. Please begin to silently review/complete this task!

  Ranking Economy US dollars) USA 1 United States 16,800,000 CHN 2 China 9,240,270 JPN 3 Japan 4,901,530 DEU 4 Germany 3,634,823 FRA 5 France 2,734,949 GBR 6 United Kingdom 2,521,381 BRA 7 Brazil 2,245,673 RUS 8 Russian Federation 2,096,777 ITA 9 Italy 2,071,307 IND 10 India 1,876,797 CAN 11 Canada 1,826,769 AUS 12 Australia 1,560,597 ESP 13 Spain 1,358,263 KOR 14 Korea, Rep. 1,304,554 MEX 15 Mexico 1,260,915 IDN 16 Indonesia 868,346

Let’s Review… Obertopia GDP What is GDP per capita? Estonia's Freedom Sound

World Mapper MB p. 152-155 Up next: How do entrepreneurs benefit the country?