ECONOMIC ANALYSIS

Economic Analysis on Economic Growth, Energy and the Environment

Economic Analysis on Economic Growth, Energy and the Environment

QUESTION 1

Topic of Article

The topic of the article is the impact of increasing economic growth on the environment and the depletion of the resource of energy. The main criterion is that land resources for energy are depleting, and alternative options are hurting the environment (fossil fuel and nuclear power). In response to this issue, it is recommended that renewable energy should be evaluated and implemented as the primary source of power generation.

Concept of Economic Growth

Gross National Product

Economic growth is calculated by the GNP growth rate. GNP is defined in economics as the gross national product and is a broad measure of a country's total economic activity. It is the collaborative value of all finished products (goods & services) created annually in a nation by its locals. The annual GNP rate in America (after adjusting inflation) has been 3.5% over the last 50 years. The GNP consists of income obtained by companies and citizens in a foreign country, but it does not include the earning income obtained by foreigners in the country. It includes the provision of services and production of tangible goods. The other item to note is that the last GNP value does include depreciation and indirect taxes like GST (general sales tax) (Investing Answers, 2013).

Gross National Income Growth per Capita

A better indication of economic growth is the gross national income growth per capita. The yearly GNI growth rate per capita is a percentage based on a standard currency (American Dollars). It is calculated by taking the gross national income and dividing it by mid-year population. The illustration below gives a general view of the last decade of income growth per capita for the regions of United States of America, United Kingdom, European Union and compared to the World income growth rate per capita (World Bank, 2013).

Gross National Income Growth per Capita (US $)

World Bank National Accounts Data

Factors of Production

The factors of production are a source of increasing economic growth. There are four factors of production which are land, labour, capital, and entrepreneurship. Land is the natural resources of the Earth including mineral deposits and the land itself. Labour is the mental and physical work of human individuals used to produce goods and services. Capital is divided into two capitals: financial and physical capital. Machinery, equipment, and tools are examples of capital. Entrepreneurship or enterprise is the creation of businesses or the taking of risky decisions regarding the other factors of production (The Times 100, 2013).

Savings

Savings rate are defined as the amount of disposable income an individual chooses not to spend. In recent times, the American consumer is not focused on saving but rather spending. With higher education expenses and an aging population, the saving rate of United States of America is falling. Lower savings represent fewer opportunities for investment in technology and this redundancy is the reason productivity has declined. The savings rate of America is represented in the graph ...