Factors that affect the long-run rate of economic growth Essay

Factors that affect the long-run rate of economic growth - Essay Example The pace at which long economic growth is realized is referred to as the long-run rate of economic growth. Natural Resources These are substances that occur naturally in nature and are beneficial for the growth of economy. Examples include timber, mineral deposit, water, air and land. A well endowed country in terms of the natural resources will realize a faster economic growth rate provided all the other factors are constant, that is, the country does not suffer any form of abnormality in issues such as the morale of the citizens, labor provision or transportation that would otherwise lead to stunted or retarded economic growth. It is easier for a country having natural resources to realize a self advancement when citizens of the country in question are trained to utilize a given natural resource. For example, a country that has mineral deposits, can easily acquire the necessary skills and machinery required for the mining process. In another perspective, a country might be having a commodity which perhaps it does not need at a given time. Another country in need of the resource can buy it and in turn, the selling country will generate some income which in turn will lead its economic growth (Mankiw, 2001). ] Labour Resources It is the partial or whole engagement of a person’s body or mind with a view of receiving some payment in return. It represents the required human capital required in the transformation of both raw and national resources into consumer commodities. It is only achievable with the availability of able bodied persons capable of working in different fields due to its flexibility. Improvement to the human capital can be done through training them to improve their skills and in the long run be in a position of handling more technical tasks even better. Entrepreneurship It is taken as a factor of production that will lead to the long-run rate of economic growth on the grounds that there can be existence of resources and still not be convert ed into finished goods. Entrepreneurs are needed in order to create goods and services which are of benefit to man. They assume any risk that comes in their way (Melvin & Boyes, 2012) Components of the Gross Domestic Product (GDP) measure According to Stroup and Sobel, Gross Domestic Growth refers to the total value of commodities produced and services rendered in a country within a period of one year. The final goods and services are mainly categorized into four, namely: Consumption (C) Investment (I), Net Exports (F), and Government Purchases (G).They can also be referred to as building blocks of the Gross Domestic Product and can be illustrated in the equation; C + I + F + G = GDP. Consumption This forms the largest component of the Gross Domestic Product. It consists of purchases of durable goods, non durable goods and services. Durable goods are the goods that are used for a long period of time since they do not get worn out easily. Their useful life is usually more than three years. Examples of such commodities include: washing machines, vehicles, textbooks, furniture and mobile phones (Stroup & Sobel, 2009). These goods can be resold by the owner after a given period of time. This can be as a result of reduced efficiency of the good in question or perhaps, the owner wants to raise cash to use elsewhere. The owner can also resell ones durable goods as a result of wanting to acquire a new one. Non durable goods – their useful life is very short and hence used for a short time period. Some of them are consumed immediately after purchase. Examples include: food, cosmetics, soap and petrol. Unlike durable goods, these goods are non resalable. Whereas durable goods such as a car or a business premise can be rented out, the same