What Are the Different Methods of Investment in Economic Growth?

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  • Written By: Geri Terzo
  • Edited By: Shereen Skola
  • Last Modified Date: 03 November 2018
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The different methods of investment in economic growth could originate from either the public or private sectors. Financing activities could be national or international and may involve grants as well as loans. Economic support might be provided to individuals or entire regions in an attempt to stimulate commerce. While a common type of investment is money, support might also be directed in the form of political policy, credits, or tax breaks, for instance.

Public investment in economic growth may be provided by government agencies. Distributions could be made into specific business sectors. Some of the areas that a federal department might support include transportation, agricultural development, and technology, for instance. As a result of the funding that can be provided by the public sector, a regional economy may become better positioned for expansion. Signs of improvements could be illustrated in greater employment opportunities, strides in research and development (R&D), and progress across industries in a country.

Another way that a federal division could attempt to provide an investment in economic growth is to offer certain incentives for beneficial practices. This might include tax benefits for supporting socially responsible behaviors, including the integration of clean energy. For instance, a government might extend financial advantages to businesses or individuals who use solar or other forms of alternative power instead of electricity generated by fossil fuels.


When a government agency makes it easier for citizens to obtain home ownership, that division may be making an investment in economic growth. A higher standard of living for low-income families in particular could have beneficial results, such as the reduction of crime in an area. Federal programs that promote home ownership might benefit small communities but the impact could eventually be felt elsewhere. Families with stable homes may be better able to provide children with an education so that they can eventually make a contribution to society and towards economic expansion.

In some instances, for-profit financial institutions can make an investment in economic growth to poverty-stricken regions. Although these organizations may earn some economic reward, they may also become motivated by any progress towards eliminating poverty around the world. This method could include the award of small loans that are extended to poor people living in rural areas with little or no access to financing.

As a result of the credit they receive, residents might be able to create better opportunities for families. Typically, the money provided in what's known as the microlending process is a loan and the recipients must pay the funds back with low interest. The method has the potential to stimulate economic growth as entrepreneurs can launch new businesses and introduce stability into otherwise dire financial circumstances.



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