1. Factors that Lead to Economic
Growth
Unit 4 Notes

2. Economic Growth
 There are 4 factors that influenceThere are 4 factors that influence
economic growth within a country:economic growth within a country:
 Investment in Human CapitalInvestment in Human Capital
 Investment in Capital GoodsInvestment in Capital Goods
 Natural Resources availableNatural Resources available
 EntrepreneurshipEntrepreneurship
 The presence or absence of these 4The presence or absence of these 4
factors determine the country’sfactors determine the country’s
Gross Domestic Product for the yearGross Domestic Product for the year

3. What is Human Capital?
 All of the skills, talents, education, and abilitiesAll of the skills, talents, education, and abilities
that human workers possess---and the value thatthat human workers possess---and the value that
they bring to the marketplacethey bring to the marketplace
 Examples: computer/reading/writing/math skills,Examples: computer/reading/writing/math skills,
talents in music/sports/acting, ability to followtalents in music/sports/acting, ability to follow
directions, ability to serve as group leader & cooperatedirections, ability to serve as group leader & cooperate
with group memberswith group members
 A country’s Literacy Rate impacts Human Capital--A country’s Literacy Rate impacts Human Capital--
the percent of the population over 15 that canthe percent of the population over 15 that can
read/writeread/write

4. How does Human Capital
Influence Economic Growth?
 Nations that invest in the health, education,Nations that invest in the health, education,
& training of their people will have a more& training of their people will have a more
valuable workforce that produces morevaluable workforce that produces more
goods & servicesgoods & services
 People that have training are more likely toPeople that have training are more likely to
contribute to technological advances,contribute to technological advances,
which leads to finding better uses ofwhich leads to finding better uses of
natural resources & producing more goodsnatural resources & producing more goods

5. What are Capital Goods?
 All of the goods that are produced in the
country and then used to make other
goods & services
 Examples: tools, equipment, factories,
technology, computers, lumber, machinery,
etc.
 What are some capital goods used in our
classroom?

6. How do Capital Goods influence
Economic Growth?
 The more Capital Goods a country has =
the more goods & services they are able
to produce
 The US has superior capital goods.

7. What are Natural Resources?
 All of the things found in or on the earth;All of the things found in or on the earth;
“gifts of nature”“gifts of nature”
 Examples: rivers, minerals, animals,Examples: rivers, minerals, animals,
plants, oil, timber, etc.plants, oil, timber, etc.

8. How do Natural Resources
Influence Economic Growth?
 Countries that have a lot of naturalCountries that have a lot of natural
resources are able to use them toresources are able to use them to
produce goods & services cheaper than aproduce goods & services cheaper than a
country that has to import naturalcountry that has to import natural
resourcesresources
 Russia is rich in natural resources, butRussia is rich in natural resources, but
because of the harsh climate & size, it’sbecause of the harsh climate & size, it’s
hard for Russians to get to them.hard for Russians to get to them.

9. What is Entrepreneurship?
 It can be several things:It can be several things:
 Starting your own businessStarting your own business
 Inventing something newInventing something new
 Changing the way something was previouslyChanging the way something was previously
done so that it works betterdone so that it works better
 Can you name any entrepreneurs thatCan you name any entrepreneurs that
you’ve heard of in the past?you’ve heard of in the past?

10. How does Entrepreneurship
Influence Economic Growth?
 Entrepreneurship creates jobs andEntrepreneurship creates jobs and
lessens unemploymentlessens unemployment
 Encourages people to take risks, and inEncourages people to take risks, and in
doing so, they’ve created betterdoing so, they’ve created better
healthcare, education, & welfarehealthcare, education, & welfare
programsprograms
 The more entrepreneurs a country has,The more entrepreneurs a country has,
the higher the country’s GDP will be…the higher the country’s GDP will be…

11. How is Economic Growth
Measured?
 Economic growth in a country isEconomic growth in a country is
measured by the country’s Grossmeasured by the country’s Gross
Domestic Product (GDP) in one yearDomestic Product (GDP) in one year
 GDP = the total amount of final goods andGDP = the total amount of final goods and
services produced in one year within aservices produced in one year within a
countrycountry

12. Gross Domestic Product
 GDP is a domestic measurement because itGDP is a domestic measurement because it
measures only what has been producedmeasures only what has been produced
within the country--this doesn’t includewithin the country--this doesn’t include
products that are imported.products that are imported.
 It is much better for the economy of aIt is much better for the economy of a
country to produce its own goods andcountry to produce its own goods and
services (this increases the country’s GDP).services (this increases the country’s GDP).

13. Gross Domestic Product
 Measuring the GDP each year can:Measuring the GDP each year can:
 Compare one country’s economy to anotherCompare one country’s economy to another
 Check a country’s economic progress overCheck a country’s economic progress over
timetime
 Show if the economy is growing or notShow if the economy is growing or not

14. Standard of Living
 The higher a country’s GDP = a betterThe higher a country’s GDP = a better
standard of living for the people withinstandard of living for the people within
the countrythe country
 In order for a country to have anIn order for a country to have an
increasing GDP, it must invest in humanincreasing GDP, it must invest in human
capital through education & training, andcapital through education & training, and
it must produce goods that have value toit must produce goods that have value to
be sold within the country or exported.be sold within the country or exported.