36) Causes of economic growth

Question 1

What causes an outward shift of a country’s PPF?

Answer 1

Successful supply-side policies such as spending on education or a reduction in government legislation

Question 2

What causes the trade cycle?

Answer 2

D-Side:
- Housing market bubble (bubble bursts)
- Stock market crash (boom)
- Central banks sharply raises (lowers) interest rates
- Sudden increase (decrease) in tax levels
- Global recession (boom)
- Sharp rise (fall) in UK pound on FOREX markets
S-Side:
- Sudden rise (fall) in key commodity prices (e.g. oil)
- A sudden increase (decrease) in Trade Union action

Question 3

What affects economic growth in the SR?

Answer 3

• Interest rates set by the central bank
• Fiscal policy
• Commodity prices (e.g. oil and gas)
• Exchange rates
• Trading conditions in other countries
• Confidence of businesses & households

Question 4

What are the causes of LR economic growth?

Answer 4

• Investment
• Productivity
• Labour supply
• Research
• Innovation
• Enterprise

Question 5

What is the best measure of growth?

Answer 5

Real GDP per capita