2.5.1 Causes Of Growth ✅ Flashcards
What are the factors that cause econ growth?
Depends LR and SR but production factors.
What causes short run econ growth? What graphs show this?
Increase in AD. (Shift right)
Shown by PPF dot moving closer to PPF line.
+
AD/AS graph shift right in AD line.
What causes LR economic growth? (Norm depends on Keynesian or classical). What graph shows this
Change in quality or quantity of production factors.
PPF ( curve shifts to the right).
What is the difference between actual and potential growth?
Actual in the increase in GDP but potential is increase in productive potential of an economy over time.
What is export led economic growth?
Growth occurring from increased sales to other countries.
Why is international trade (export led) important for econ growth?
- Effects AD through rise in exports.
- Prevents poor balance of payments eg Germany and china.
- Sustained high exports will encourage investment and increase labour demand.
How can labour cause econ growth?
- Increase the size = as more people of working age will produce more growth. Eg provide childcare + raise retirement age.
- increase in quality = education will result in improved labour quality/more efficient + less structural unemployment + more able to contribute to change and innovation.
How does Capitol improve econ growth? Evaluate?
- Investment will result in access to new tech/ more machines.
- Not all investment will lead to econ growth.
How does enterprise cause econ growth?
- Tax benefits/grants will encourages business development/new jobs.
- Will incentivise businesses to invest.
How can technological progress cause econ growth?
- Av is lower (less labour or equipment needed).
- New products on market and keeps MPC high due to new stuff.
How does efficiency cause econ growht?
- Less resources are needed to make same amount of goods so more can be made.
