2.5.1 Causes of Growth

Question 1

What needs to happen for economic growth to occur?

Answer 1

An increase in the quality or quantity of one of the 4 factors of production.

There are other factors.

Question 2

How do improvements in the quality and quantity of labour influence economic growth?

Answer 2

• Quantity - More people of working age = more economic growth.
• Quality - More important in the long run. Improved labour quality = more output per worker = less vulnerable to structural employment (Increased mobility of occupation as a result of higher skills.)

Question 3

How can the government improve the quantity of labour?

Answer 3

• Looser immigration restrictions / encouraged immigration.
• Higher retirement age.
• Free childcare to encourage mothers to come back to work.

Question 4

How can the government improve the quality of labour?

Answer 4

• Improved education
• Apprenticeships
• Healthcare improvements

Question 5

How does land influence the growth of an economy?

Answer 5

Most developing countries develop through exploiting natural resources.

DUTCH DISEASE.

Question 6

How can increased capital cause growth?

Answer 6

More sustained investment = more technology = more output.

However not all investment = higher GDP due to its nature (Like building houses)

Question 7

How does efficiency cause growth

Answer 7

Efficiency = Less resources needed to create same amount of goods so more goods can be produced.

In order for there to be efficiency there needs to be competition and a solid market mechanism.

Question 8

Distinction between actual and potential growth?

Answer 8

Actual - % change of GDP

Potential - Change in productive potential of an economy - LRAS / PPF shifts.