Sunflower Incorporated.International Business Assignment

Sunflower Incorporated.International Business - Assignment Example Economic growth refers to an increase in the size of a country’s national income. It can also be defined as an increase in the amount of goods and services produced by the economy of a country over a given duration. To measure economic growth is to quantify the increase in the welfare of a country and derive with numerical accuracy of this large scale economic and social change. The formula for the calculation of economic growth is outlined below as; Economic Growth= Change in income/ Income of the Previous PeriodÃâ€" 100 Economic growth is crucial to the national economy well-being of any country and; therefore, requires the government to take the necessary actions to help its citizens to enhance that growth. Many factors that promote strong economic growth are connected to the business framework cycle and efforts directed towards improving the living standards for the consumers. Factors that stimulate economic growth are namely, healthy competition within the market place, innovations in technology, increases in labor supply, and expansion in value and extent of the resources available such as land. Other factors include; science progression and productive knowledge, growth of individual skills and government incentives, the cultivation of new markets in emerging nations, and finally the investment in foreign ventures all are stimulants of a strong economic growth. Central bank is a bank that is owned and operated by the government. It is also a government bank and a banker’s bank. The centr al bank stimulates strong economic growth by conducting monetary policy that controls the money supply in the economy and hence generates more production and high living standards. The central bank also maintains the stability of exchange rates, ensures equitable distribution of income, stable prices of commodities and high levels of employment as ways of influencing the economic expansion. The government banker also sets the official rates of interest that are utilized to manage inflation so that economic growth can be positive and quantifiable. A trade deficit arises when a country buys or imports more than it sells or exports to other countries. A trade deficit is not necessarily undesirable. It bestows benefits and carries some costs and the benefits may outweigh the costs. Trade deficits are a vehicle for extending the gains from trade, where lending and borrowing among nations can lead to a more saving allocation efficiency, and preferred consumption pattern overtime (Sloman, John & Mark 24). Trade deficits do not necessarily cause slower economic growth or lead to any economy-wide job losses. However, a persistent trade deficit is harmful to the national economy since it may decrease aggregate demand and also reduce the actual Gross Domestic product by diverting manpower and finances from competing ventures like imports and exports where these resources are required most due to their productivity. Another consequence is the high levels of foreign investment into the deficit country. This has the effect of hurting investment locally as local investors prefer to keep assets than invest them due to their favorable nature. A persistent high trade deficit in a country can cause economic hardship in the long run in case of changes in political leadership or the beginning of a war. Persistent trade deficits tend to make countries more exposed to global variations in costs and products. This vulnerability though short-lived can produce risks that are highly une xpected for investors. International financial and monetary activities are becoming more integrated since they bring the countries involved more extensive international