2.5.1 - Causes of Economic Growth

Question 1

Short run economic growth

Answer 1

Increase in real GDP
Factors: Interest rates, fiscal policy, commodities, currency changes, trading, confidence

Question 2

Long run economic growth

Answer 2

Sustained rise in a country’s productive potential
Factors: Investment, productivity, labour, r and d, innovation, enterprise

Question 3

Export led growth

Answer 3

Significant part of the expansion of real GDP is from successful exporting of goods and services
Factors: Generates foreign currency, creates jobs, Allows imports of tech, trade stimulates competition

Question 4

Advantages of export led growth

Answer 4

Injection into circular flow of income, provides profits for businesses, accelerator effect, industries around trade, competition

Question 5

Potential risks of export led growth

Answer 5

Over-dependence on other countries, trade surpluses may cause protectionism in importing countries, production isn’t put to meet domestic needs, demand pull inflation,