1. To begin, economic growth is an increase in market value of goods and services that an
economy produces. This growth is measured as the change in the real GDP or gross
domestic product. There are three main components that drive long run economic
growth: productivity, demographic changes, and labor force contribution. However,
long-run growth is defined as a sustained rise in quantity of goods and services. When
GDP growth is only driven by population, economic growth is excessive. Growth in
productivity includes: capital, labor, energy, materials, and services. Demographic
changes determine long-run growth by the quantity and quality of natural resources. The
last influence of long-run growth is labor force. The labor force of an economy weighs
heavily on the participation and size of the labor force (i.e. workers, hours worked). High
developing countries or economies and industrialization are linked to high labor force
participation and low birth and death rates.
