2.5.1 Causes of Growth

• What are the four factors of production?

  Land, labour, capital, enterprise
• What is required for economic growth to occur?

  Increase in quality or quantity of production factors
• What does an increase in LRAS indicate?

  It increases the potential output level
• How does land contribute to economic growth?

  Discovery of new resources increases growth
• Why do developing countries grow more from resource exploitation?

  They lack existing resources to exploit
• What has driven Saudi Arabia's economic growth?

  Discovery of oil resources
• How does an increase in labour affect economic growth?

  Improves growth through quality or quantity increase
• What factors can change the size of the workforce?

  Immigration, demographics, participation rates
• How does raising the retirement age affect economic growth?

  Increases the population of working age
• What government action can encourage higher participation rates?

  Providing free childcare for mothers
• How does immigration contribute to economic growth?

  Brings skilled workers to the economy
• Why is improving the quality of labour important?

  It increases efficiency and output per worker
• How does education improve labour quality?

  Provides necessary skills for efficiency
• What is structural unemployment?

  Unemployment due to lack of skills
• How do skilled workers contribute to economic growth?

  They drive innovation and technology changes
• How does sustained investment affect capital?

  Access to new technology improves productivity
• Why might some investments not lead to increased GDP?

  Some investments may be unsuccessful
• How do tax benefits and grants encourage enterprise?

  They promote business development and job creation
• What happens if there is too much wealth distribution?

  It reduces the incentive to work hard
• How does technological progress contribute to economic growth?

  Reduces production costs and creates new products