proportion of its scarce resources should be used to build factories and machines and provide more education, all of which will increase future production. How much of a nation's resources should be used to produce goods and services, such as food and clothing, for immediate use? In addition, the nation must decide how to avoid unemployment and other economic setbacks that waste resources.

3/- HOW THE ECONOMY GROWS

An economy must grow to provide people with an increasing standard of living--that is, more and better goods and services.

Making the economy grow. Four main elements make it possible for nations to produce goods and services. These elements, called productive resources, are: (1) natural resources, (2) capital, (3) a labour force, and (4) technology. Economists define natural resources as all land and raw materials, such as minerals, water, and sunlight. Capital includes factories, tools, supplies, and equipment. Labour force means all people who work or are seeking work, and their education and skills. Technology refers to scientific and business research and inventions.

In order to grow, a nation's economy must add to its productive resources. For example, a nation must use some of its resources to build factories, heavy equipment, and other capital goods. A nation also must develop additional natural resources, create new technologies, and train scientists, workers, and business managers, who will direct future production. The knowledge of these people is known as human capital.