What factor does not contribute to economic growth?

Higher interest rates do not contribute to economic growth and can often have the opposite effect. When interest rates are increased, the cost of borrowing money rises. This typically leads to reduced spending by consumers and businesses, as loans become more expensive. As a result, investment in new projects, expansion of businesses, and consumer spending all may decline, which can slow down economic growth.

In contrast, factors such as technological innovation and improvements in productivity directly enhance the efficiency and output of the economy. Technological advancements can lead to new products and services, while better productivity means that more can be produced with the same amount of resources. Additionally, increases in human capital, which relate to education, skills, and experience of the workforce, contribute to a more efficient and innovative economy, ultimately driving growth. These factors support a sustainable increase in economic activity, while higher interest rates generally hinder it.