Economic Growth and Development

When you analyse economic growth, it is necessary to distinguish between the short and the long term:

In the short term, this increase responds mainly to the variations in demand.

The growth in the long term is a result of the increase in productive resources (whilst in the short term, they are more or less fixed), besides an increase in the population and tehcnological improvements have an effect.

The following conditions should exist in a country if they want to experience economic growth in the long term:

External and internal competition which contributes to accelerating technological innovations, which increases the quality of the products and which reduces costs.

An efficient legal system, which is capable of resolving disputes quickly.

A developed capital market, capable of promoting savings and channeling these savings towards investment.

A macroeconomy balance: situations of economic imbalance, like for example, a business shortfall or an excessive public shortfall, end up effecting economic growth negatively.

A moderated rate of inflation: this creates a favourable climate for investment, it favours international competitiveness, it avoids an increase in prices which makes economic growth difficult, etc.

End of The Macroeconomy Course 

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