15 Marker Practice Flashcards
Factors affecting Econ growth
Econ growth is defined as the long run increase in the country’s productive capacity and potential national output
In the long run, improving quality and quantity of factors of production such as the labour force will affect Econ growth. By providing workers with extra eduction and training theirs skill capacity will increase, this will allow for more job vanacinced to be taken up as the workers now have the desired skills, this will then lead to an increase in production in certain factors that had low Agrarreform supply but Hugh ad. Providing workers with edu and training thru apprenticeships will also help to reduce strutuctural unemployment as the lack of skills in the country will be solved this will in turn increase the country’s productive capacity and potential national output, this will also lead to higher stsandard of living as workers will see the increased skill sets as an incentive as it will lead to increased levels of incomes.
This is apart of tye 5 factors of production and decreasing unemployment is one of the main gov objectives alongside Econ growth.
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Short run Econ growth is cyclical
Another factors is fiscal policy. This is where gov use increased gov spending and decreased taxes to stimulate ad.
An expansionary fiscal policy is when gov reduce taxes, such as direct taxes eg income taxes, in return this increases the the disposable income available for consumers to spend. Consumption is the biggest factor ad therefore due to increased disposable income it will lead to increase consumption which then increases ad this leads to increased consumer confidence. This increased levels of demand will lead to an increase in animal spirits as ad is high so as will also increase, firms will then increase their price levels which will then lead to increased profit margins and more injections into the economy.
Increased animal spirits can lead to increased business investments which can lead to expansion of firms overtime generating more revenue, this will also decrease the govs budget deficit
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