2.5.1 Causes of economic growth Flashcards

1
Q

Short-run economic growth
(Actual growth)

A

Occurs when there is an increase in the quantity of goods/services produced in an economy over a given period of time.
It is measured by the percentage change in real national output (real GDP).

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2
Q

Long-run economic growth
(potential growth)

A

Caused by an increase in the capacity (productive capacity) of the economy.

This usually happens due to a rise in the quality/quantity of inputs (factors of production) – for example, more advanced machinery or a more highly skilled labour force.

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3
Q

How is short-run growth shown on a PPF?

A

Short run growth is shown by a movement from point A to point B, whilst the PPF itself remains fixed.

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4
Q

How is long-run growth shown on a PPF?

A

Long run growth is shown by a shift outwards of the PPF. (An increase in the capacity of an economy).

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5
Q

Export-led economic growth

A

Growth that occurs as a result of an increase in the sale of goods/services to foreign countries.

  • Net exports is a component of aggregate demand (AD).
  • For many developing countries, their exports represent a high percentage of the annual AD and gross domestic product (GDP). When the value of the exports rise, the real GDP rises significantly - and vice versa
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6
Q

Supply side causes of economic growth

A
  • Increased investment
  • Higher labour productivity
    -Increase in labour force
  • Improved technology
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7
Q

Short run economic growth shown on a supply/demand diagram

A

This is illustrated on an AD/AS diagram by a rightward shift in AD.

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8
Q

Long run economic growth shown on a supply/demand diagram

A

This is illustrated on an AD/LRAS diagram by a rightward shift in LRAS.

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