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Economics Theme 2 (Macro) > 2.5 > Flashcards

2.5 Flashcards

1
Q

What are the two types of economic growth?

A

Actual economic growth and potential economic growth

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2
Q

What is actual economic growth?

A

Increasing GDP in an economy over a specific period of time. Current performance of economy. It considers the changes in consumer spending and other factors

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3
Q

What is potential economic growth?

A

Economy’s max rate of expansion. Productive capacity

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4
Q

What is long term economic growth?

A

Sustained increase in a country’s productive capacity. When the expansion is consistent and prolonged

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5
Q

How does Land cause economic growth?

A

-The discovery of new resources e.g. oil will increase economic growth
-Economusts argue that developing counteries tend to grow the most from exploiting new resources. E.g. Saudi Arabia has experienced large growth rates almost purely because of their discovery of oil.

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6
Q

How will changing the Size of workforce ( Labour) cause economic growth?

A

-Changes in size of workforce can come from immigration
-Change in age profile of population
-Raising retirement age

On the whole the larger workforce the more goods and services that can be produced

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7
Q

How will changing the Quality of workforce ( Labour) cause economic growth?

A

-In the long term improving the quality of the workforce can be done through education
-Improved education can improve the skill of the workforce and so the quality
-More skilled workforce means they can adjust to change e.g. new tech,business ideas, innovation

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8
Q

How does capital cause economic growth?

A

-If country revives sustained investment they can access or develop new tech which enables the country’s productivity to improve
-Means new machines can be bought even if not advancement

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9
Q

How Enterprise cause economic growth?

A

-If government offers tax benefits and grants they will encourage developments of businesses which will create more goods and services to be produced which will increase the economic growth
-If too much wealth distribution then it’s just more tax for the rich to the poor and there will be little in the centre working hard
-Lack of incentive means businesses won’t invest and so there will be little to no economic growth

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10
Q

What’s a recession?

A

A sustained period of weak or negative growth in real GDP (output) that is accompanied by a significant rise in the unemployment rate.

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11
Q

What causes a recession?

A

-Strikes
-Inflation increase
-External Shocks-War
-Natural Disasters (Earthquake,Tsunami)

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12
Q

What does POG stand for?

A

Positive Output gap

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13
Q

What’s a Positive output gap?

A

Inflationary pressure. Occurs when actual output is more than full-capacity output. This happens when demand is very high and, to meet that demand, factories and workers operate far above their most efficient capacity.

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14
Q

What does NOG stand for?

A

Negative Output gap

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15
Q

What is a Negative Output Gap?

A

Deflationary pressure, Reccesionary Pressure. Occurs when actual output is less than what an economy could produce at full capacity. A negative gap means that there is spare capacity, or slack, in the economy due to weak demand.

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16
Q

What are the POGS and NOGS on a graph?

A

The POGS are the peaks and the NOGS are the troughs

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17
Q

What does a NOG do to the GDP and Price?

A

GDP is less than P

18
Q

What happens in a NOG?

A

Some factors are under utilised. Main problem is likely to be rising unemployment and possible deflation risk.

19
Q

How is a NOG shown on a PPF graph?

A

The NOG is the point inside the curve up to the curve

20
Q

What does a POG do to the GDP and Price?

A

GDP is greater than the P

21
Q

What happens in a POG?

A

Some resources are being overworked. Main problem is rising demand-pull + cost push inflationary pressures.

22
Q

How is a POG shown on a PPF graph?

A

The point that is outside the curve to the point on the curve

23
Q

Out of a NOG and POG which is working over potential and which is working under potential?

A

NOG-Under potential
POG-Over potential

24
Q
A
25
Q

What is the economic (trade) cycle/Business Cycle?

A

Refers to the fluctuations of economic activity in an economy over time. It involves alternating periods of expansion and contraction in real economic output,employment and other indicators.

26
Q

What are the key phases of the economic (trade) cycle/business cycle?

A

Rapid expansion (boom)
Slow down
Peak
Recession
Trough
Economic recovery

27
Q

What’s the boom phase in the economic (trade) cycle?

A

A period when the percentage rate of growth of Real GDP is fast and higher than the long-term trend

28
Q

What’s the slowdown phase in the economic (trade) cycle?

A

Weakening of the rate of growth, Real GDP is still riaient but at a slower rate

29
Q

What’s the recession phase in the economic (trade) cycle?

A

Period of at least 6 months when on economy suffers a decrease in Aggregate Output, employment, investment and business/consumer confidence

30
Q

What’s the depression/trough phase in the economic (trade) cycle?

A

A prolonged downturn in the economy and where a nations RGDP falls by at least 10%

31
Q

What’s the recovery phase in the economic (trade) cycle?

A

RGDP starts to increase and unemployment begins to fall

32
Q

What are the effects of a recession?

A

-Decrease in consumer/business confidence
-Decrease in Spending
-Decrease in AD
-Increased Savings
-Decrease in investment
-Decrease in employment
-Increased benefits
-Increased Gov Spending

33
Q

What’s an economic boom?

A

It’s the opposite of a recession and it’s a period of robust economic growth characterised by an increase in economic activity,production and employment.

34
Q

What are the advantages to consumers of economic growth?

A

-Increase in demand for housing as people have more money
-Improved productive efficiency due to better tech which leads to lower prices or higher quality goods
-Could lead to increased happiness (but not necessarily the case)

35
Q

What are the disadvantages to consumers of economic growth?

A

-Increased inequalities and so could lead to inflation

36
Q

What are the advantages to firms of economic growth?

A

-Investment will increase since businesses are more succesful
-Business confidence will improve as there are potential demand increases
-As a result of increase investment means better tech
-Higher profits due to higher demand and lower costs
-Also alls opportunities for new firms to establish themselves

37
Q

What are the disadvantages to firms of economic growth?

A

-Firms who sell inferior goods may lose out. Markets disappearing due to globalisation

38
Q

What are the advantages to The Government of economic growth?

A

-Tax revenues will rise as more goods and services being bought
-Can help reduce budget deficit, perhaps even bringing about a budget surplus which allows money to be saved fro future recessions

39
Q

What are the Disadvantages to
The Government of economic growth?

A

-Means people expect more from the gov e.g. better education, better roads

40
Q

What are the advantages to Current and Future Living Standards of economic growth?

A

-Lower poverty levels
-More goods and services for people to enjoy
-Housing standards and quality of food increase.Health also tends to increase
-Increased gov spending will lead to improved living standards
-High benefits in developing countries

41
Q

What are the Disadvantages to Current and Future Living standards of economic growth?

A

-Decreases future living standards due to exploitation of the environment
-Increased inequalities between rich and poor

Economics Theme 2 (Macro) (12 decks)

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