1 What are the two key factors that generate economic growth? The experiences of the EU and Hong Kong make a striking example of the effects that our choices about consumption and capital goods have on the rate of economic growth.

If a nation devotes all its factors of production to producing consumption goods and services and none to advancing technology and accumulating capital, its production possibilities in the future will be the same as they are today.

To expand production possibilities in the future, a nation must devote fewer resources to producing current consumption goods and services and allocate some resources to accumulating capital and developing new technologies. As production possibilities expand, the quantity of consumption goods and services in the future can increase. The decrease in production of consumption goods and services today is the opportunity cost of an increase in consumption in the future.