2.1.1 Economic growth Flashcards
What are the 3 measures of economic growth
GDP
GDP per Capita
GNI per Capita
What is the definition of GDP
Value of all final G+S produced in a year
What does GDP measure
Growth
Living Standard
Drawbacks of using GDP to measure economic growth
Double counting
Informal Activity
Errors given vast data collection
Negative Externalities
Income Inequality
Output Produced
Other Quality of life aspects
What does GDP per Capita measure
Measures average individual income
Drawbacks of using GDP per Capita to measure economic growth
Same drawbacks as using GDP
Factor income abroad and significance of remittances
Influence of FDI and repatriation of profit
What is the definition of GNI per Capita
Total income generated by a countries factors of production regardless of where those factors of production are located
Formula of GNI per Capita
GNI = GDP + net factor income(income earned by domestic workers-income earned by foreign workers)
What is the definition of Economic growth
An increase in Real GDP in an economy in a year caused by an increase in AD or LRAS
What causes Short Run(Actual) Growth
An increase in AD
What causes an increase in AD
Lower interest Rates
Lower Income/Corporation Tax
Higher Consumer/Business Confidence
Higher Government Spending
Weaker Exchange Rate
What causes Long Run(Potential) Growth
An increase in LRAS
What causes an Increase in LRAS
Increase in Quantity/Quality of CELL
Increase in Productive Efficiency
What causes an increase in Quantity/Quality of CELL and productive efficiency
Increase in Labour Productivity
Increase in workforce size
Investment
Infrastructure Improvements
Increase in competition
New resource discoveries
What is the definition of a boom
When growth is strong and at its peak
What is the definition of a recession
Negative growth usually when 2 successive quarters have negative growth
What is the definition of a trough
The lowest point of actual growth line
What is the definition of a recovery
When growth starts to increase from a trough
What is a positive and negative output gap
Positive output gap - When Actual growth > Trend growth
Negative output gap - When Actual growth < Trend growth
Characteristics of a Boom
High profit
Low unemployment
High consumer/Business confidence
High Demand Imports
Rising Tax
Inflation
Characteristics of a Recession/Trough
Declining AD
High Unemployment
Fall in Business/Consumer confidence
Lower Inflation
Low demand for Imports
Fall in house prices
Characteristics of a Recovery
Rising Consumer/Business confidence
Higher House prices
Higher Investment
Benefits of Growth
Higher Disposable Income
Higher employment
Higher Profits for Firms
Increase in Tax revenue for government
Costs of Growth
Inflation
Income Inequality
Environmental Costs
Current Account deficit
