10) Economic Growth Flashcards
What is the economic growth measured by
⚫️increase in ➡️output ➡️real GDP ➡️potential GDP ➡️PPF
When does economic growth occurs
⚫️when country produces more goods and services than it did in the previous year
⚫️due to an increase in capital stock of the economy
➡️enables economy to produce more goods and services in the long run
What is the benefits economic growth
➡️higher incomes
➡️increased tax revenues
➡️increased profits for firms
Why is higher incomes a benefit of economic growth
➡️people achieve better standards of living
➡️through consumption of more goods and services
Why is increased tax revenues for the government a benefit of economic growth
➡️the higher income can be taxed
➡️can be spent on providing better
➡️healthcare
➡️education
➡️infrastructures
➡️this can increase the productivity capacity in othe economy, and shift the LRAS and PPF to the right in the long run
➡️creating more economic sustainable growth
Why is increased profits for firms a benefit of economic growth
➡️profits can be reinvested back to businesses, to buy capital goods
➡️this will increase the productive capacity of the economy
➡️shift the LRAS and PPF to the right
➡️creating further sustainable growth
What are the cost of economic growth
➡️externalities
➡️personal costs
➡️high level of investments
➡️increase in inequality
➡️balance of payments problems
Why is externalities a cost of economic growth
⚫️higher air and noise pollution
⚫️reduces living standards in the short run
⚫️reduces long term sustainability growth
➡️people become more ill because of the pollution
➡️can not work
Why is personal cost a cost of economic growth
➡️greater use of labour devices such as cars
➡️leads to lower level of exercise
➡️leads to obesity
Why is high level of investment a cost of economic growth
⚫️the economy has to sacrafise consumption so it can invest
➡️can be shown in ppf diagram
⚫️although consumption is sacralised in the short term
⚫️investment in capital goods will lead to PPF shift right
➡️higher standards of living in the long term
Why is an increase in inequality a cost of economic growth
⚫️economic growth raises everyones incomes and living standards
➡️but some increases at a much faster rate than others
Why is balance of payment a cost of economic growth
⚫️ rising income will lead to increase in imports
➡️this will increase current account deficits during a period of growth
What does sustainable economic growth mean
⚫️when the economy tries to grow without damaging future generations ability to grow
What is the kyoto agreement
An international commitment to sustainability agreement to reduce carbon emission
Describe the case study in china about sustainability
➡️august 2004
➡️16 worlds most polluted cities in China
➡️half of Chinas population have water supplies, contaminated with animal and human waste
➡️ river system and air heavily polluted
➡️this is the result of chinas heavy reliance on coal-fire electricity generation
