Economic growth is a major factor in improving the quality of life. A growing economy provides more jobs and more goods that meet the needs of the population. There are two types of economic growth - intensive and extensive. Extensive economic growth has a number of characteristic differences.
Instructions
Step 1
The basis of extensive growth is an increase in the amount of labor and means of production. This development path was the first, but it is characterized by low productivity of an individual worker.
Step 2
Due to the increase in the number of labor in production, the unemployment rate is decreasing. At the same time, the productivity of the work of each worker remains unchanged. A quantitative increase in jobs leads to an increase in the level of production, which is the basis of economic growth.
Step 3
Economic growth by reducing the unemployment rate has a number of limitations. It is possible to increase the employment of the population up to a certain level, after which it will no longer be possible to attract new labor forces to the economy, and growth will return to its former boundaries. It should be noted that without the growth of education and professional qualities of the population, labor productivity will not increase.
Step 4
The development of technical progress is not characteristic of extensive growth in the economy. The methods of production remain unchanged, as well as the methods of organizing and managing the output of products. The economy goes into a state of stagnation when innovations in production are not used. As a result, production efficiency does not increase. This circumstance leads to the following feature of extensive growth - the rate of return on assets does not grow. This does not allow enterprises to timely update their fixed assets, which leads to their gradual wear and tear. Over time, this process is aggravated and can lead to the destruction of production resources.
Step 5
The advantage of an extensive development path is the ability to quickly embrace and begin to develop natural resources. However, speed is complemented by low efficiency, which leads to resource depletion. The use of backward technology and equipment does not allow the full use of natural resources, moreover, it can cause harm to the environment.
Step 6
Moreover, fixed capital does not keep pace with the increase in the labor force, which leads to a decrease in the ratio of fixed capital per worker. This does not allow workers to produce more products, and is another factor that limits the further development of the economy.
Step 7
Extensive growth in the economy requires the use of more labor and resources, while the productivity of production does not increase. This leads to inefficient production, which results in stagnation in the economy.
