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Flashcards in Economic Growth Deck (21)
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1
Q

define economic growth

A

the expanison of the productive capacity of a country

2
Q

What is short run economic growth?

A

An increase in output, with existing resources

3
Q

What is long run economic growth?

A

Represents an increase in productive capacity (move outside PPC)

4
Q

How is short run economic growth measured?

A

measured as annual changes in real GDP, recoreded as % change

5
Q

How is long run economic growth meausred?

A

by averaging out annual growth rates over longer periods of time.

6
Q

Problems with measuring economic growth? (4)

A
  • the volume of data to be collected involves degrees of inaccuracy and omissions
  • Omissions relate to non-market activities
  • non-marketed government services like free health care need to be valued.
  • Omissions also refer to informal economies like illegal activities.
7
Q

Benefits of economic growth? (6)

A
  • Growth of the economy’s productive capacity permits increased consumption and increased investment, which increases standard of living.
  • Economic growth produces increased employment opportunities.
  • Leads to business confidence.
  • linked to increase in trade competitiveness
  • increases the tax revenues of governments leading to more public spending.
  • Expansion of an economy’s productive capacity decreases the risk of inflation
8
Q

Costs of economic growth?

A
  • Leads to externalities like pollution and health problems

- It gives no indication to the distribution of the wealth.

9
Q

Causes of economic growth? (4)

A
  • Consumption by households
  • Spending by firms
  • Government spending
  • Export spending
10
Q

Causes of economic growth, Consumption by households?

A
  • Decreasing tax —> More disposable income

- Quantitative easing —> Borrowing is easier and cheaper interest rate.

11
Q

Causes of economic growth, Government spending?

A
  • Jobs creation

- Raise benefit leveles

12
Q

Causes of economic growth, Spending by firms?

A
  • Decrease co-orporation tax
  • Reduce interest rate
  • Government subsidies
13
Q

Causes of economic growth, Export spending?

A
  • Rising income levels in other countries
  • Improved quality of goods
  • Low exchange rate= exports cheaper.
14
Q

Government macro-economic objectives to do with economic growth?

A
  • Achieve a steady rate of economic growth, that is economic growth must be sustainable.
  • To avoid fluctuations in growth output, that is economic sustainibility.
15
Q

Define GDP?

A

GDP is the total value of output of goods and services in an economy in a given time period.

16
Q

How is the value of GDP measured?

A

-Output method (cost of making it)
-Income
-Expenditure (market price)
O=Y=E

17
Q

How is the value of GDP measured (output method)?

A

-By summing the value of every industry’s output. This method takes care to use value-added data to avoid double counting

18
Q

How is the value of GDP measured (income method)?

A
  • Summing the payments to the factors of production (wages, profits, interest, rent), which represents national income.
  • It is necessary to exclude transfer payments
19
Q

How is the value of GDP measured (expenditure method)?

A

-Take the types of expenditure:
Consumer expenditure, Investment expenditure, Government expenditure, Export expenditure.
-Subtract Import Spending.
-Don’t include transfer payments

20
Q

Define Nominal GDP?

A

The value of national output measured at current prices

21
Q

Define Real GDP?

A

The adjust value of national output measured at constant prices, adjusted for inflation.