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9 Cards in this Set
- Front
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What is economic growth |
-The growth in GDP. -GDP is the monetary value of all goods and services produced in an economy in a year. -Therefore economic growth is the growth in the value of output of a country. -The total value of output becomes incomes for those who produce it. -Therefore the value of output of the country in a year is the same as the total j comes if the people who produced it. -When there is economic growth, both output and incomes are rising. |
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How is economic growth measured |
Rate of growth in GDP= change in GDP / orignal GDP x 100 To measure GDP there are 3 methods that all equal the same: 1) the output method: counting up the total output in the economy 2) the expenditure method: the expenditure method adds together all of the spending on the countries g/s. This should equal the monetary value of everything produced. 3) the production method: counts up the value of all of the FOPs in the economy and how much they add at each stage of production of any g/s. Is the most confusing and inaccurate method of calculating GDO but is still used. |
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Difference between GDP and GNP |
GDP: Gross Domestic Produce. In country GNP: Gross National Produce. Owned by that country, but may be overseas. |
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What is GDP per capita |
-GDP divided by the population. -Also the average income of each person in the country. However it is not distributed evenly. -Using GDP per capita is the easiest way of comparing SOL (standard of living) between countries. |
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Analysing the determinants of economic growth |
1) investment: the spending on capital goods. More investment means that the economy has the ability to produce more g/s in the future. 2) changes in technology: technological progress means the quality of capital goods improved and a given quality of capital can now be produced. 3) education and training: this affects the quality and quantity of the work done. 4) labour productivity: can be measure as the output per worker over a period of time. Higher productivity will encourage economic growth. 5) size of the workforce: the economy can produce more if it had more labour. 6) natural ressources: if a country discovers or develops natural ressources this can stimulate economic growth. 7) government policies: affect the economic growth in 3 ways: - mixed economies are the most efficient strange to help achieve economic growth. -government investment in infrastructure is important for economic growth as infrastructure is the basics systems and services that an economy uses to work effectively. -the governments of mixed economies can affect both the demand side and supply side of the economy in order to encourage economic growth using various policies and measures. |
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Evaluating the benefits of economic growth |
-An increase in material SOL. Happens when GDP rises at a faster rate than population, so GDP per capita increases. -Poverty decreases. As output and income increases, the government will receive greater race revenue (which can be used to increase SOL) -An increase in welfare for population. An increase in economic growth leads to an increase in revenue taxes, which causes and increase in SOL. -An increase in employment. More workers are required to produce the extra output brought about by economic growth. |
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Costs of economic growth |
-Environmental costs. The production and consumption do g/s can lead to more pollution. -Air pollution. Rapid growth and therefore high energy consumption, leads to and increase in air pollution which can damage health. -Global warming. Bad effect on environment including rise in sea levels that increases flood risks. -Congestion. Overcrowding, pressures on services, increase in traffic. -Loss of non-renewable resources. Economic growth uses up natural resources that can’t be renewed. -Lower quality of life. Causes a lower quality of life, for example, less exercise, eat unhealthy, jobs are more boring/ repetitive. -Inequalities of income and wealth. Benefits can be unequally spread which causes larger inequalities. -Inflation. A period of economic growth may lead to the price level rising- happens when demand increases rapidly but supply increases more slowly, leads to demand-pull inflation. |
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How can the government prevent a recession |
-Making it easier to conduct businesses. Eg decrease business taxes. -decrease taxes. -increase government spending. -provide incentives for businesses to set up in growing industry. Eg wind power energy. -employing people in productive activities in public sector -encouraging investment by both the private and public sector. |
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What is real GDP |
The base year is used to compare all future prices to. One must consider wether are really producing more g/s or wether it simply look like this because prices have inflated (increased). |
