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July 20, 2018 

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BALANCE OF PAYMENTS SURPLUS: An imbalance in a nation's balance of payments in which payments made by the country are less than payments received by the country. This is also termed a favorable balance of payments. It's considered favorable because more currency is flowing into the country than is flowing out. Such an unequal flow of currency will expand the supply of money in the nation and subsequently cause a decrease in the exchange rate relative to the currencies of other nations. This then has implications for inflation, unemployment, production, and other facets of the domestic economy. A balance of trade surplus is often the source of a balance of payments surplus, but other payments can turn a balance of trade surplus into a balance of payments deficit.

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ECONOMIC GROWTH, PRODUCTION POSSIBILITIES:

Economic growth is the process of increasing the economy's ability to produce goods and services. It is achieved by increasing the quantity or quality of resources. This process can be illustrated as an outward shift of the production possibilities curve.
Production possibilities, which analyzes the alternative combinations of two goods that an economy can produce with given resources and technology, indicates economic growth with an outward shift of the production possibilities curve. The general method of achieving economic growth is by increasing the quantities or qualities (Q and Q) of the resources.

The Growth Process

Shifting The Curve
Economic growth is demonstrated by an outward shift of the production possibilities curve. The curve presented in the exhibit to the right shows the production possibilities tradeoff between crab puffs on the vertical axis and storage sheds on the horizontal axis.

With existing resources and technology, the economy can produce any combination of crab puffs and storage sheds up to or on the production possibilities curve. However, it cannot produce any combination of production beyond the curve, such as point M.

While point M cannot be reached today with existing resources and current technology, it can be reached tomorrow through economic growth. Growth expands the frontier, causing it to shift outward.

To illustrate the process of economic growth, click the [Growth] button. Point M can be reached when economic growth expands the frontier. Once the process is completed, point M lies ON the new production possibilities curve. Another success story achieved through the miracle of economic growth.

Resource Quantities

One of two ways to achieve economic growth is by increasing resource quantities. Three notable resource quantity options are:
  • Labor: The quantity of labor can be increased through:
    • Natural population growth.
    • Immigration from other nations.
    • More participation and fewer nonworkers.

  • Capital: The key to getting more capital is investment, giving up satisfaction today to get capital tomorrow.

  • Materials: The key to increasing the quantities of materials is through exploration. Exploration is best illustrated by digging or drilling into the Earth's crust in search of mineral or fossil fuel deposits.

Resource Qualities

The other way to achieve economic growth is to increase resource qualities. Two important resource quality options are:
  • Education: Education increases the quality of labor resources. Better educated workers are more productive workers. Education includes both formal, sitting-in-a-classroom learning and informal, on-the-job-training experience.

  • Technology: Technology is the knowledge and information society as a whole possesses concerning the production of goods and services. Better technology enables more production. Technology concerns all aspects of production, but it is often seen as an improvement in the quality of capital.

<= ECONOMIC GROWTHECONOMIC GROWTH, SOURCES =>


Recommended Citation:

ECONOMIC GROWTH, PRODUCTION POSSIBILITIES, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: July 20, 2018].


Check Out These Related Terms...

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Or For A Little Background...

     | economic growth | production possibilities | production possibilities curve | assumptions, production possibilities | technical efficiency | graphical analysis | limited resources |


And For Further Study...

     | economic efficiency | efficiency | economic goals | seven economic rules | free lunch | three questions of allocation | four estates | government functions | political views | scarcity | technology | investment | business cycles | gross domestic product | labor force participation rate | structural unemployment | aggregate market | aggregate supply increase, long-run aggregate market | aggregate supply determinants | capital stock, aggregate supply determinant |


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