Which factors contribute to economic growth?

Economic growth is primarily driven by factors that enhance the productive capacity of an economy. One of the most critical contributors to economic growth is the increase in capital and improvements in productivity.

When capital increases, it usually refers to investments in physical capital like machinery, infrastructure, and technology that enable workers to produce more goods and services. Improved productivity means that the same amount of labor can produce a greater output due to better techniques, tools, or technology. For example, if workers have better machinery, they can create more products in the same amount of time, thereby increasing overall economic output.

Moreover, improvements in productivity often stem from innovation and technological advancements, which can lead to more efficient processes and products. This combination of increased capital investment and enhanced productivity leads to sustained growth in an economy, driving more goods and services to be produced and consumed, ultimately contributing to a rise in living standards.

The context surrounding the other choices illustrates their negative impact on growth. A shrinking labor force, a decline in technological innovations, and reductions in trade activity would all tend to hinder economic growth by limiting the workforce's ability to produce goods and services, stalling advancements that drive efficiency, and reducing market access and competition, respectively.