2.5 Economic Growth Flashcards
What is required for economic growth to occur?
An increase in quality or quantity of land, labour, capital, or enterprise, or more efficient use of these factors.
What is LRAS and its significance in economic growth?
Long-Run Aggregate Supply; an increase in LRAS indicates an increase in the potential level of output in an economy.
How can land contribute to economic growth?
Discovery of new resources, such as oil, can significantly enhance economic growth, particularly in developing countries.
What factors influence the size of the workforce?
Immigration, demographic changes, and participation rates.
How does improving the quality of the workforce affect economic growth?
It increases efficiency and output per worker through better education and skills.
What role does capital play in economic growth?
Sustained investment leads to access to new technology and improved productivity.
What is the impact of enterprise on economic growth?
Government incentives like tax benefits encourage business development, leading to job creation and increased goods and services.
True or False: Technological progress can lower production costs.
True
What is actual growth?
The percentage change in GDP reflecting the production of more goods and services.
Define potential growth.
The change in productive potential of the economy over time, indicated by shifts in LRAS or the PPF curve.
What is an output gap?
The difference between actual GDP and the estimated long-term GDP value.
What characterizes a positive output gap?
GDP is higher than the estimated long-term GDP.
What are the phases of the trade cycle?
Boom, downturn, recession (slump), and recovery.
What occurs during a boom phase?
High national income, increased consumption and investment, and rising imports.
What defines a recession?
High unemployment, low consumption, investment, and imports, with potential deflation.
How does economic growth affect consumers?
Increased demand for housing, potential rise in wealth, but may lead to inflation and inequalities.
What are the benefits of economic growth for firms?
Increased investment, improved business confidence, and higher profits.
How does economic growth impact government revenues?
Higher tax revenues from increased economic activity allow for improved public services.
What is the relationship between economic growth and living standards?
Economic growth generally leads to lower poverty levels and improved quality of life.
Fill in the blank: Economic growth can lead to _______ of the environment.
exploitation
What is a characteristic of a downturn phase?
Declining output and income, leading to reduced consumption and investment.
What happens during the recovery phase of the trade cycle?
National income and output begin to increase, leading to lower unemployment.
What is the relationship between increased government spending and living standards?
Increased government spending will lead to improved living standards both now and in the future
Better educated people usually have higher living standards.
In which countries is economic growth likely to have the highest benefits?
Developing countries
Economic growth provides significant advantages in developing regions.
What is a potential negative consequence of increased economic growth?
Decreased future living standards due to environmental exploitation
A rise in income leads to increased consumption of resources and pollution.
How does a rise in income affect access to electricity?
More people have access to electricity and use it more freely
This contributes to depletion of non-renewable resources.
What are some concerns related to sustainability of growth?
Depletion of non-renewable resources, increased levels of pollution, waste, and congestion
These concerns affect future generations.
How might higher incomes influence environmental practices?
Higher income households can buy cleaner fuels and support research for greener technology
Richer countries can devote resources to developing efficient technologies.
What demographic trend is associated with higher income households?
Higher income households tend to have less children
This lowers the natural rate of population growth, reducing future resource needs.
What is a potential social cost of economic growth?
Increased inequalities between rich and poor
Only the rich may benefit from economic growth, potentially lowering the living standards of the poor.
True or False: Economic growth guarantees equal benefits for all socio-economic classes.
False
Economic growth may disproportionately benefit the wealthy.
