External Influences - Business Study Notes

... ECONOMIC GROWTH Economic growth is an increase in the nation's production of goods and services. It is measured in GDP. * Growth potential of an economy depends on the amount and quality of economical resources available (eg labour and fixed assets). * Also depends on productivity (how hard a nation works) * Governments can make short term growth by lowering tax and interest rates. This makes businesses borrow money for production and make consumers borrow money to spend. = increase in demand in economy What can economical growth do? Businesses - * growth in GDP means higher revenues and higher profits * gives economies of scale * increases confidence in businesses and helps plan for the future * BUT may cause shortages of raw materials and skilled labour due to fast growth Governments - * Higher revenue = more investment in new projects = more jobs = less to pay for welfare benefits * increase revenue through taxation * BUT

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