2.5 Economic Growth

Question 1

What are the causes of growth?

Answer 1

1)Land
2)Labour
3)Capital
4)Enterprise
5)Technological progress
6)Efficiency

Question 2

What is actual growth?

Answer 2

Actual growth is the percentage change in GDP. It is when the economy is actually produced more goods and services.

Question 3

What is potential growth?

Answer 3

Potential growth is the change in productive potential of the economy overtime, so the LRAS or PPF curve shifts.

Question 4

What is an output gap?

Answer 4

An output gap is the difference between the actual level of GDP and the estimated long term value for GDP.

Question 5

What is a positive output gap?

Answer 5

When GDP is higher than estimated.

Question 6

What is a negative output gap?

Answer 6

When GDP is lower than estimated and there is spare capacity in the economy.

Question 7

What is the trade cycle?

Answer 7

This is periodic but irregular up and down movements in economic activity.

Question 8

What are the 3 characteristics of a boom?

Answer 8

National income is high, positive output gap, inflationary pressure.

Question 9

What are the characteristics of a recession?

Answer 9

High unemployment, inflationary pressure will be low, real GDP falls in at least two successive quarters.

Question 10

Benefits of economic growth to consumers?