2.5 economic growth Flashcards
how can economic growth happen
an increase in quality or quantity or efficiency in one of the four factors of production: land, labour, capital or enterprise
how can land effect economic growth
through the discovery of new resources like oil
how can labour effect economic growth
the more people of working age there are the more growth there will be. Raising the retirement age will increase the population of working age.
Improved education will improve labour quality as it will mean that workers have all the skills they need and are more efficient, so output per worker increases
how can capital effect economic growth
more machines can be bought and used, even if these are not a technological advancement, so more goods can be produced
how can enterprise effect economic growth
government offers tax benefits and grants, they will encourage the development of business, creating jobs and meaning more goods and services are produced, which will increase economic growth
how can technological improvements effect economic growth
average cost of production is lower, whether this is because it is quicker to produce or less labour or equipment is needed. Also, it creates new products for the market and this helps to increase consumption and keeps MPC high as there are new things to buy.
how can land efficiency economic growth
Efficiency is important in bringing about economic growth as it means less resources are needed to produce each good, so more goods can be produced
how can gov keep up efficiency
keep up competition
what is actual growth
the percentage change in GDP. It is when the economy is actually producing more goods and services
what is potential growth
the change in productive potential of the economy over time shifting the PPF curve outwards
what’s an output gap
difference between the actual level of GDP and the estimated long-term value for GDP
what’s a negative output gap
GDP is lower than estimated
what’s a positive output gap
GDP is higher than estimated
what is the trade cycle
This is the periodic but irregular up and down movements in economic activity,
measured by fluctuations in real GDP and other macroeconomic variables
what are the characteristics of a boom
high national income
positive output gap
inflationary pressures
high consumption
high investment
wages increase
increased imports (people wants more things)
what are the characteristics of a recession
high unemployment
deflationary pressures
low economic growth
less consumption
less investment
wages decrease
negative output gap
decreased imports
what are the characteristics of a downturn
output and income fall which leads to a fall in consumption and investment as well as tax revenues. Payments for benefits rise as unemployment rises. People begin to accept jobs for lower wages due to higher levels of unemployment. This causes inflationary pressure to ease and a fall in the number of imports.
what are the characteristics of a recovery
national income and output begin to increase with unemployment falling and consumption, investment and imports increasing. Inflationary pressure begins to grow as workers start to demand higher wages.
impacts of economic growth on consumers
higher demand for houses as people have more money which increases house prices leading to wealth effect
Improved productive efficiency due to better technology could lead to lower prices
or higher quality goods.
increased happiness
increased inequalities and so may not have any effect on the average consumer and may lead to inflation, which has negative effects for consumers
impacts of economic growth on firms
impacts of economic growth on government
impacts of economic growth on living standards
