12- Economic Growth

Question 1

Economic growth definition

Answer 1

The rate of change in real GDP per
capita over a long period of calendar time.

Question 2

Points to note about measuring growth

Answer 2

• We are interested in real growth
• Growth is also measured per capita
• Measured over long periods of time
• Growth rate needs to be measured from the same point of the business cycle.

Question 3

Adam Smith growth approach

Answer 3

• Division of labour- higher productivity- higher output and capital accumulaition.
• Wages rose by population increase, which increased demand
• Process continues

Question 4

Problem with Smith views

Answer 4

• He assumed higher population would lead to more output- but may not generate more output per head