"Secular stagnation: The importance of economic growth"!

Essay by tomassouCollege, UndergraduateB+, November 2014

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INTRODUCTION TO MACROECONOMICS

Tom Assouline 1442477 Christian Krelling Monday, November 24, 2014 !!

One thing falls, everything else falls apart "Secular stagnation: The importance of economic growth"!!

Economic growth is the increase in the market value of the goods and services produced

by an economy over time. It is measured as the percent rate of increase in real gross domestic

product, or real GDP. Of more importance is the growth of the ratio of GDP to population, which

is also called per capita income. GDP growth caused only by increases in inputs such as capital,

population or territory is called extensive growth. So when per capita income stays at relatively

high levels, the percentage of savings is likely to start exceeding the percentage of longer-term

investments in, for example, infrastructure and education, that are necessary to sustain future

economic growth and this is what we call a secular stagnation. Economic growth comes to a

stand-still. According to Shirish Pandit (Program Director, ESMT Customised Solutions),

"Secular stagnation is a condition of negligible or no economic growth in a market-based

economy".

An economic nightmare with an ugly name is how Clive Crook describes secular

stagnation in his article on the subject. He has all the reason to see it that way. Over the last

century humans have been very successful in the innovation sector. Some of the biggest

Invention have been created over the last century which is actually a very small amount of time

if we look at everything that has been done so far. Thanks to the invention of electricity, we went

from a fireplace to heat up our home to central heating, electric lightbulb everywhere,

refrigerator to keep us from grocery shopping everyday. Electricity liberated women and made it

possible for them to have time to work. Transportation depended...