an Economic Problem for Dummies! Todays problem: Economic growth.

Just like many things in life, the economy can experience growing pains too.

Growth has been in the news a lot of late, with the US economy’s growth quickening in its fourth quarter, now at around 3%, France cutting its growth forecast to 0.5% from 1% and even the Philippines growth rate slowing amid global uncertainties. But what is growth and why is it so important for the economy?

Recently the UK’s GDP, the gross domestic product, shrank by 0.2% in the last quarter, this means that it could then be facing a recession if this shrinkage continues for another quarter. This sort of depression was the cause of the UK’s current unstable economic state, with high unemployment, so growth is clearly an important factor in the economy.

An increase in growth is an increase in
the economies' expansion!

Economic growth can be defined as an expansion of the PPF, production possibility frontier, of the economy, measured in the long run. It is caused by an outward shift in supply on a PPF curve and shrinkage, the opposite of economic growth, occurs when supply decreases. It is measured, as seen above, by GDP and GNP, GDP being the money earned in the UK, GNP being the money made by the UK. It has all kinds of advantages from confidence to employment and living standards as it essentially means the increase in an economies output and usually, therefore, an increase in its income.

It does have some disadvantages, that of pushing currency value up, inflation, and the increased output will also have environmental implications, with more green house gases being emitted to achieve the higher output.

Growth can be stimulated, broadly speaking, by spending but causing this spending is easier said than done. To cause the consumers to spend on products require many factors, the two most popular ones being confidence and income, but other ones include happiness, employment and many others all of which would encourage people to buy, which would in turn encourage firms to buy capital and so on and so forth, creating an expansion or growth in the economy.

Keeping up normal posting is difficult at the moment with my physics course work and what not but hopefully when that's all out of the way, say in a week, for half term, completely normal service can once again be resumed.