Effect of Investment on Economic Growth and Productivity

Economic growth is positively affected by a rise in investments. Being a key determiner of the gross domestic product, investment is a tradition to embrace. It not only empowers production of goods and services but also lowers cost of living in the long run. This is why those who go for personal loans are encouraged to invest their money. Even though the benefits of investing may not be felt immediately, the results are truly rewarding in the long run.
Investment is simply expenditure directed to structure, inventories and capital which may be equipment meant for the production of goods or services. A good example is when a manufacturer intends to create an extra production line. The facilities and equipment they purchase to increase their production and handling capacity is investment. Houses and household items both commercial as well as residential, all fall under investment in structure.
Any income is spent on wants and needs, saved or spent on investments. Good budgeting should be aimed at making good allocations for all the three money mincers. This is both at personal and national levels. Saving is the path for investing. This is more so where time is needed to create the necessary economic base or gather finances up to a scale or measure that is relevant to the investment needed. Saving and investing can therefore be categorized together. With the right information, business ventures can use small investing opportunities to grow their capital. It works better than just saving.
Productivity is a measure of quantity produced against the time it takes. That is the very basic look at it but a detailed check will factor in issues like quality of goods and services produced or end products. Industrialization has come a long way with human or mechanical labor being replaced by automated and machinery operations bit by bit each day. This saves on labor cost and increases efficiency.
Economic growth has for long been directly tied to an increase of the GDP. This is rightfully so because of the direct link between the two. Mankiw in his book“Principles of Economics” presents an analysis taken from 15 countries over a period of 31 years on investment and economic growth. The study which ran from 1960 to 1991 showed that countries with vigorous investment realized the highest economic growth overall. This just goes further to prove there is a positive effect on economic growth where investment is embraced.
Investment as a culture will demand people to spend less on their daily needs and wants and invest what they save. This is the greatest challenge with the west where a good lifestyle demands all the income. Countries like Japan, China and Korea have taken mega steps in economic growth in the last few decades perhaps because of a different lifestyle that allows a room for saving and investing. Whether a country is a spender or a saver is greatly determined by the general public’s attitude and mind set up. They are after all the foot soldiers that yield a good or a poor GDP depending on how hard they worked or what they used with their personal loans.