Economic Growth and Productivity

A .  Investment in human capital-making people more productive
Public funding for education is the most common investment in human capital.
Firms hire labor and train the labor to be more productive-an investment in human capital.

B .  Investment in physical capital
Physical capital is machines that labor use to create goods and services.
Firms use both loans and other investment tools to purchase more physical capital.

A nation with a high savings rate will invest in more capital and grow the capacity (LRAS) of the economy.

C .  Research and development, and technological progress
Research and development funds can spur innovation and change causing technology to increase productivity.
Investments in technology increase productivity and increase productive capacity.

D . Growth policy
Macroeconomic policy that provides stability, property rights, and incentives for investment and growth tend to see the capacity of the economy to increase.