3.1 Economic Growth

Question 1

What is economic growth?

Answer 1

It is the increase in economic activity in a country. It is shown by the growth in GDP.

Question 2

What is GDP and what does it stand for?

Answer 2

GDP (gross domestic product) is the total value of output produced within a country annually.

Question 3

When there is economic growth what three things are rising?

Answer 3

Total output = Total income = Total spending

Question 4

How is economic growth measured?

Answer 4

By percentage change in GDP.

Question 5

What is the formula to calculate economic growth?

Answer 5

(Difference in GDP ÷ original GDP) × 100

Question 6

How is total GDP calculated?

Answer 6

By adding together the value of all output of goods and services in an economy.

Question 7

What does GDP per capita show?

Answer 7

The output per person and the average income per person.

Question 8

How is GDP per capita calculated?

Answer 8

GDP ÷ population

Question 9

What is GDP per capita used to measure and why can this be inaccurate?

Answer 9

It can be used to measure standard of living through the average incomes in a country. However, this can be inaccurate as incomes are not distributed evenly within an economy.

Question 10

What is a boom?

Answer 10

A period of high economic growth.

Question 11

What is a recession?

Answer 11

When a country’s GDP falls for two or more consecutive quarters (6 months).

Question 12

What do the determinants of economic growth all effect?

Answer 12

Either the quality or quantity of factors of production.

Question 13

What are the six determinants of economic growth?

SINGET

Answer 13

1. Size of workforce
2. Investment
3. Natural resources
4. Government policies
5. Education and training
6. Technology

Question 14

How can the size of workforce increase economic growth? Give an example.

Answer 14

• Increase of workers (factor of production) in a country means that more can be produced.
• Eg: rise in immigration can increase the quantity of labour available to work.

Question 15

How can investment increase economic growth? Give an example.

Answer 15

• Spending on capital goods can make producing goods more efficient than workers doing the job, which leads to the economy producing more in the future.
• Eg: investing in capital such as computers.

Question 16

How can government policies impact economic growth? Give an example.

Answer 16

• For supply, the government can spend money on roads. Better infrastructure could increase efficiency, leading to higher output.
• For demand, government policies such as income tax levels can determine expenditure in an economy which impacts growth.

Question 17

How can the availability of natural resources increase economic growth? Give an example.

Answer 17

• If a country finds natural resources, it can either sell them or use them to make more goods and services, both of which would increase GDP in an economy.
• Eg: the UK discovers oil reserves.

Question 18

How can education and training increase economic growth? Give an example.

Answer 18

• Education and training can effect the quality and quantity of the labour factor of production.
• Eg: if more money is spent on training workers, they will have more skills, leading to higher productivity and therefore output.

Question 19

How can technology increase economic growth? Give an example.

Answer 19

• Advances in technology can improve the quality of goods and/or produce more in the same amount of time.
• Eg: if a restaurant’s oven can heat up faster, it would be more efficient and increase output.

Question 20

What are three benefits of economic growth?

Answer 20

1. Greater supply of goods and services can increase standards of living due to higher comsumer choice.
2. More workers are needed, leading to more jobs and lower unemployment.
3. Government receives more tax revenue through income tax and higher spending - VAT.

Question 21

What are four costs of economic growth?

Answer 21

1. More pollution can negatively impact quality of life.
2. Depletion of non-renewable resources due to increased use of raw materials.
3. Increased inflation if demand rises faster than supply.
4. Can lead to inequalities if incomes aren’t spread evenly.

Question 22

How can economic growth impact social sustainability?

Answer 22

Quality of life could be reduced if people are harmed due to ongoing air pollution from economic growth.

Question 23

How can economic growth impact environmental sustainability?

Answer 23

Economic growth can lead to global warming. This can reduce factors of production as crops can be lost due to rising sea levels.

Question 24

How can economic growth impact economic sustainability?

Answer 24

Rapid growth can negatively affect the future generations if resources are depleted due to excessive use of raw materials.