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productivity of resources
may result from technological progress or changed 
labour practices, for example. 
7.4 Factors needed for sustained economic growth 
Sustained 
economic growth depends heavily on an adequate level of new investment, which will be 
undertaken if there are 
expectations 
of future growth in demand. After investment has taken place on 
the basis of expectations, the level of income will increase, by the operation of the multiplier. But there 
is no reason why the actual level of income should end up increasing as much as the investing business 
people thought it would. It follows that investment, a factor in growth, is dependent on 
business 
confidence 
in the future, which is reflected in expectations of growth in consumption. 
7.5 Natural resources 
The rate of extraction of natural resources will impose a limit on the rate of growth. Production which 
uses up a country's natural resources, such as oil, coal and other minerals, depletes the stock of 
available resources; it is therefore, in a sense, 
disinvestment
. 
7.6 Technological progress 
Technological progress 
is a very important source of faster economic growth.

The same amounts of the factors of production can produce a higher output. 

New products will be developed, thus adding to output growth. 
There can be technical progress in the labour force. If workers are better educated and better trained 
they will be able to produce more. For example, if there is a fault in the production process, a skilled 
worker will be able to deal with it quickly, whereas an unskilled worker might have to call for a superior 
instead. 
Technological progress can be divided into three types. 
(a) 
Capital saving
: technical advances that use less capital and the same amount of labour per unit 
of output 
(b) 
Neutral
: technical advances that require labour and capital in the same proportions as before, 
using less of each per unit of output 
(c) 
Labour-saving
: technical advances that uses less labour and the same amount of capital per unit 
of output 
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CHAPTER 3
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THE MACROECONOMIC ENVIRONMENT