Economic growth defined as increasing the capacity of an economy. It used to produce goods and service which compared from one period of time to another. Also, it measures the change of real national output in short period. Whereas, long term growth shown to increase the potential Gross Domestic Product (GDP). Thus, economic growth plays an important role in the entire nation. This is to see whether the country is well developed or vice versa. On the other hand, economic growth creates high tax revenues to cut down government’s expenses. Therefore, it will reduce government borrowing and debt to GDP ratios. Indirectly, high increase make better standard of living. Besides that, more selection of goods and services are there for consumers. Again, more investment will be available cause of good economy growth. Last but not least, a good economic in a country improving public services. For example, government spends more on education and development areas. This is to ensure that good infrastructures are there.
Thus, there are four factors that influence economic growth, namely natural resources, human capital, entrepreneurship and capital goods. Firstly, natural resources mean the gifts of nature. It is something that can be found in or on the earth. Examples of natural resources are agriculture, minerals and oil. Countries that full of natural resources produce cheaper goods and services as compare of importing natural resources from other countries. Next, human capital is also one of the factors that promote economic growth. Human capital means talents, skills, abilities and education that human workers possess. Nowadays, government used human capital of their citizens to support them. For examples, government provides free training and education programs. From there, it enhances workers to be more productive as compared to those unskilled labors. Besides that, the contributions to technological advances increase. It is because of their well-trained workers. It leads to produce more goods and natural resources. Next, entrepreneurship plays an important role of affecting economic growth. For instance, entrepreneurship creates jobs opportunity. In addition, entrepreneurship creates innovations too. As try to enter the markets with new products. In short, the higher the GDP, the more entrepreneurs have in the particular country. Last but not least, capital goods also influence economic growth. Capital goods are goods that used in the production of other goods and services. Factories, tools, machinery, and houses buildings are the examples of capital goods. In
addition, economists classify newly produces capital goods; invest by building modern factories, buying new machines and having lower GDP than a country that devoted all resources to produce consumer goods. In conclusion, economic growth increases real GDP as well as the value of national expenditure and output.
2.0 CONCEPT OF NATIONAL PRODUCTION