Economic Growth is the most important indicator that tells a country and government if they are advancing their economy. Economic growth, in the short run, is the rise in real GDP due to the rise in aggregate demand, and in the long run, it's an increase in productive capacity-the maximum output that the economy can produce.
There are many factors that can cause economic growth, but it occurs in mainly two different ways: the increased use of labor, land, capital and entrepreneurial resources by using better technology, or by management strategies and increased productivity of resources through capital productivity and rising labor, thus meaning greater material welfare and a rise in living standards, However, it does not equate to having higher levels of well being for individuals in that nation in general. .
Economic growth can, in fact, have negative impacts on a nation including environmental degradation, crime, and how economic growth is unsustainable as it can't continue on forever. As shown by the business cycle, a country has to have times of recession and also times of recovery, which leads to a greater inequality between different classes in society, that is, the gap between the rich and the poor may grow. .
One factor that can cause economic growth is through investment, for example, by increasing the quantity of natural resources a country has, or in other words, by increasing their capital stock. The presence of natural resources is fundamental for a country to start off their manufacturing industry. By having raw materials, such as oil and coal, a country is able to produce goods at lower average costs, and therefore they will be able to export these goods, which would increase the GDP of a country.In not having raw materials, countries are at a major cost disadvantage, as they have to pay for imports of the materials. However, countries, such as Japan, make a very large amount of goods and services per person albeit having relatively few natural resources, showing that it is not essential for a country to have a large domestic supply.