The Reason Why Everyone Love Economic Growth Formula | economic growth formula

With the economic downturn experienced by most countries around the world, the economic growth formula being used has largely gone out of the window. Most governments have tried to figure out how to boost economic output while at the same time reducing the cost of living. The only problem being is that most economic growth formulas are either too complicated for the lay person or they fail to provide a clear road map to follow. A number of economic growth formula theories have been proposed all over the world but the question is that are these theories really working? Let us take a look at some of them.

One of the most widely followed economic growth formula theories is the state-level economic development program, which was first introduced in the year 1970 by the United States government under the administration of president Richard Nixon. The theory is simple enough to understand; the state level economic growth formula is to increase the amount of income tax payable to the federal government and at the same time cut down on various other indirect taxes such as those on corporate income, personal income, payroll etc. This in turn helps the federal government in both cases; it keeps the revenue flowing into the country and it also helps cut down on the amount of income taxation which it otherwise has to bear.

However, this economic growth formula is very much debated among economists. Most of them feel that the concept is not realistic as there are many other factors involved which make it practically impossible for the federal government to implement a program of such kind. For instance, cutting down on corporate tax would adversely affect small businesses that create jobs. Similarly, raising the rate on personal income would adversely affect those people who have just begun to earn but who are the primary source of job creation in the economy.

Still on the topic of economic growth formula, the theory suggests that there are two important ingredients required for an economy to grow. The first ingredient is the basic infrastructure which can be described as transport, communications etc. The second ingredient is innovation or creation of new products or services. When the infrastructure is not developed sufficiently and the innovations do not come about, the society will stagnate.

Economic growth formula thus, projects the process through which the economy grows dynamically. It projects the growth of the economy on the basis of the factors like population, investment, technology, infrastructure and so on. All this has to be projected using a sophisticated economic model with inputs and assumptions which are made by the economists.

The economic growth formula is used as a guide to project the amount of income which should be generated in a particular period of time. This is essentially . . . . . . used in all economic planning. The amount of income that can be generated per annum is primarily based on the investment that has been done in the past and the future projections of investments. Economic growth formula helps project the path and direction in which the economy can move towards.

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