3.3.1 - Macroeconomic Objectives - Economic Growth

Question 1

Define economic growth

Answer 1

Economic growth is the increase in a country’s real GDP over a given time period.

Question 2

Define the short run

Answer 2

The short run is the time period when the price level in the economy can change but the cost of factors of production is held constant.

Question 3

Define the long run

Answer 3

The long run is the time period when the price level in the economy can change and the cost of factors of production can change.

Question 4

Draw an increase in actual output

Answer 4

Caused by increase in AD or SRAS

Question 5

Draw an increase in potential output

Answer 5

Caused by:
- Increase in available resources
- Increase in productivity
- Technological advancement

(Can Al)

Question 6

List the 5 benefits of economic growth

Answer 6

• Rising household incomes
• Reduced levels of poverty
• Greater availability of goods and services
• Improved public services
• Greater employment

Question 7

List the 4 costs of economic growth

Answer 7

• Sustainability
• Income disparities
• Inflation
• Balance of payments current account deficit