Final answer:
The elements that aid productivity include labor, capital investment, and technological advancements, along with a stable legal system that enforces contractual rights. As an economy matures, the focus shifts towards elements like technology and capital deepening, and GDP growth is often measured per capita to account for changes in population. Compound growth rates are important in understanding the impact of these elements over a long period.
Step-by-step explanation:
Elements to Aid Productivity:
Productivity is essential for economic growth and is influenced by a number of factors. The factors of production such as labor, capital, and technology are crucial components. As the GDP grows, these factors of production become more efficient. Labor productivity is a significant contributor to this growth, and it is the output produced per unit of labor.
Capital investment is another key element, as it provides the tools and machinery necessary for production. Technological advancements drive efficiency gains and innovation, enabling economies to produce more with the same amount of inputs. A stable legal environment that enforces contractual rights and property rights is also fundamental to ensuring that businesses can operate with confidence and security.
Economic Maturation and Long-Term GDP Growth:
As an economy matures, the composition of GDP growth shifts. High-income countries like the United States tend to focus on capital deepening and technology to drive GDP per capita growth. Middle-income countries such as Brazil might benefit more from physical capital accumulation, improving education, and labor force skill upgrades. Low-income countries, like Niger, require basic infrastructure and human capital developments at the initial stages of their economic growth.
To accurately assess long-term GDP growth, economists focus on GDP per capita, adjusting for population changes. This provides a clearer picture of the improvement in the standard of living for the average person within the economy. Furthermore, compound interest and compound growth rates play a similar role in economic growth, indicating that even small changes in the growth rate can lead to substantial differences in income over time.