Want to know how capital goods industries influence economic growth of a country? Then keep reading this article to learn about the influence of capital goods industries on a nation’s economic growth.
Capital goods industry means a group of companies who manufacture machinery and tools and distribute to other companies. Any nation’s capital goods industry sector development leads to improving the economic condition of that country.
How Does The Economic Growth Of A Nation Influenced By Capital Goods Industries?
Generally economic growth results when there is an increase in production of services and goods. Increase in production of services and goods results from increase in consumer spending. Again, an increase in international trade and businesses results in increased investment in capital spending that impacts the production level of services and goods in an economy.
For example when consumers purchase more homes this results in more construction of homes and contractors resulting in increase in revenue.
With increase in salary standard of living also increases which reflects in overall development of a nation. This increase is measured by GDP or Gross Domestic Product that shows the economic growth of the country.
GDP is the total money or market value of the finished services and goods produced within a nation’s border within a given period of time. Hence when goods and services investment increases in a particular country it results in an increase in GDP of that country.
To learn more about how GDP measures economic growth keep reading this article.
GDP Measures Economic Growth Of A Nation
In the United States, the government releases GDP of each quarter along with annual GDP every year to calculate economic growth of the country. The U.S. estimates a yearly GDP that broadly measures overall domestic production of the country.
So you can say GDP is a comprehensive scorecard or result of a country’s economic health that shows its relative growth. Throughout history there have been several periods of high economic growth in the U.S. that resulted in new discoveries of technology and natural resources for consumption.
For example, in the 1980s the invention of the internet opened the way for the invention of new technologies that increased services and employment options. E-commerce being one of the services that revolutionized the way most of the firms did business.
In the early 2000s large reserves of shale oil were discovered in the United States that led to the U.S. becoming the largest crude-oil producer in the world. This discovery would not be possible without invention of new technology from capital goods sectors.
Without capital investment capital goods sectors cannot innovate new machinery and tools and advance technologies and discover new natural resources reserves.
Capital investment happens when businesses show interest and purchase capital goods which are assets.
Assets like equipment, vehicles, buildings, machinery and tools that help produce services and goods that consumers purchase. Hence capital investment becomes a means to further a company’s business objective.
Capital Goods Influence Economic Growth
Since the U.S. economy growth primarily results from capital investment and consumer spending increase in capital goods, these goods are made by machineries manufactured by capital goods companies. More consumers demand for a product results in more spending from a consumer which helps increase the economic growth of a nation.
Increased capital investment results in improved capital goods that results in increase in labor productivity in a company. With machinery helps work become more efficient and hence increases the company’s productivity.
Like when a new production facility uses less electricity as it has invested in new equipment and purchased a more energy-efficient building to start its production. These new technologies help create more products leading to more consumption from customers.
And more demand for products increases consumer spending resulting in economic growth.
Hope now you have a clear picture as to how capital goods influence economic growth of a company. Capital goods job sector has also grown throughout the years and is predicted to grow more in recent decades. A country’s economic growth helps increase its living standard resulting in development in different sectors. Let us know which job sector you are working in at present? Are you working in the capital goods sector?
Miranda Shaffer is a passionate blogger. She loves to share her thoughts, ideas, and experiences with the world through blogging. Miranda Shaffer is associated with Tour &Travel Blog, The Daily Notes, The Global Magazine, Top Preference, and Big Jar News.