Changes in investment shift the aggregate demand curve to the right or left by an amount equal to the initial change in investment times the multiplier. Investment adds to the capital stock; it therefore contributes to economic growth.

The economy can also appear to grow without using more resources, through growth in financial activities such as currency trading, credit default swaps and mortgage-backed securities. Such activities don’t consume much in the way of resources, but make up an increasing fraction of GDP.

Without investment, an economy could enjoy high levels of consumption, but this creates an unbalanced economy. There will tend to be a current account deficit and little investment in future growth prospects.

The quantity and availability of natural resources affect the rate of economic growth. The discovery of more natural resources, such as oil or mineral deposits, will give a boost to the economy by increasing a country’s production capacity.

What makes a good economy? A strong labor market, predominantly, though the public also values lower inflation, more economic growth, and a stronger dollar.

There are four major determinants of economic growth: human resources, natural resources, capital formation and technology, but the importance that researchers had given each determinant was always different.

Key Points Determinants of long-run growth include growth of productivity, demographic changes, and labor force participation. When the economic growth matches the growth of money supply, an economy will continue to grow and thrive.

Determinants of economic growth are inter-related factors that directly influence the rate of economic growth i.e. increase in real GDP of an economy.

An increase in GDP will raise the demand for money because people will need more money to make the transactions necessary to purchase the new GDP. Thus an increase in real GDP (i.e., economic growth) will cause an increase in average interest rates in an economy.

The sales of used goods are not included because they were produced in a previous year and are part of that year’s GDP. Transfer payments are payments by the government to individuals, such as Social Security. Transfers are not included in GDP, because they do not represent production.

Economists traditionally use gross domestic product (GDP) to measure economic progress. If GDP is rising, the economy is in solid shape, and the nation is moving forward. On the other hand, if gross domestic product is falling, the economy might be in trouble, and the nation is losing ground.

GDP is important because it gives information about the size of the economy and how an economy is performing. The growth rate of real GDP is often used as an indicator of the general health of the economy. In broad terms, an increase in real GDP is interpreted as a sign that the economy is doing well.

India’s Central Statistic Office calculates the nation’s gross domestic product (GDP). India’s GDP is calculated with two different methods, one based on economic activity (at factor cost), and the second on expenditure (at market prices). The factor cost method assesses the performance of eight different industries.

GDP (Gross Domestic Product) is a measure of (national income = national output = national expenditure) produced in a particular country. GNP (Gross National Product) = GDP + net property income from abroad.