Obstacles to economic growth and / or economic development

  • Population issues
  • Human capital inadequacies
  • Rapid population growth creates serious problems for poor countries where the rate of capital formation is low
  • Vicious circles
  • Some difficulties in adapting western technology
  • A difficult industrial revolution: in some countries, the agricultural and commercial sectors have not developed enough to sustain rapid industrial progress
  • International situation
  • Less terms of trade
  • Savings gap
  • Capital flight (foreign currency gap)
  • Dependence on debt

Supply-side constraints

  • Poor infrastructure
  • Regulatory requirements
  • Excessive bureaucracy
  • Reduced access to credit

Strategies to economic growth and / or economic development

  • Fiscal policy
  • Reducing taxes to increase disposable income and encourage spending
  • Expansionary fiscal policy is most adequate in a recession when there is a drop in consumer spending
  • Monetary policy:
  • Controlling the money supply
  • Controlling interest rates: lower interest rates can increase demand
  • Exchange rate policy
  • Direct controls: limit the behavior of households and businesses
  • Supply side policies: improving the functioning of the market economy