4.6 economic growth

Question 1

what is GDP
full form

Answer 1

(Gross Domestic Product) - the total market value of all final goods and services provided within an economy in a given period of time.

Question 2

What are the 3 ways to calculate national output (GDP)

Answer 2

output
income
expenditure

Question 3

What is national output

Answer 3

Total value of output of goods and services produced

Question 4

Definition of national income

Answer 4

Total amount of income earned by all factors of production of a country, either employed domestically or internationally.

Question 5

What all is included in the calculation for national expenditure

Answer 5

Total spending by individual households, firms and government organisations including spending on exports by overseas consumers but excludes spending on imported goods and services.

Question 6

What are transfer payments
where are they excluded from
why are they excluded

Answer 6

They are unearned incomes. No productive activity has been done to receive those payments. They are excluded from the calculation of national income.

Question 7

How to calculate national output

Answer 7

national income - national expenditure

Question 8

What is GVA

Answer 8

Gross value added is the market value of its output goods or services minus value of inputs used in production of outputs.

Question 9

What is GDP in relation to GVA

Answer 9

GDP is a measure of the total value added to resources in an economy through the production of goods and services

Question 10

Name the 2 types of gdp

Answer 10

Nominal
Real

Question 11

What is nominal gdp

Answer 11

Value of output produced in an economy in a period of time, measured at their CURRENT market values or prices

Question 12

what is real gdp

Answer 12

value of output produced in an economy in a period of time, measured assuming the prices are unchanged over time.

Question 13

Which gdp is used to compare a countries output year over year

Answer 13

Real GDP

Question 14

What is GDP per head/capita

formula
represents what

Answer 14

GDP per capita = GDP / Population

Gives a good measure of the living standards in the economy since it measures the average output or income per person.

Question 15

How do GDP statistics help a govt

Answer 15

Make better decisions on economic policies and resource allocation in production

Comparison of living standards year over year

Comparison of living standards in diff countries or diff areas in the same country

Question 16

What is the definition of economic growth

Answer 16

The increase in a country’s real GDP or national income over a period of time

Question 17

What does economic growth indicate

Answer 17

economy is utilizing its resources better or its productive capacity has increased

Question 18

What are the 2 types of growth on a PPC and explain them

Answer 18

Potential growth - when a ppc shifts outwards

Actual growth - When the economy moves from a point inside the ppc to a point closer to the ppc

Question 19

Name all the causes of economic growth

Answer 19

Discovery of more natural resources

Investment in new capital and infrastructure

Technical progress

Increase in quality or quantity of human resources

Reallocation of resources

Question 20

How does a discovery of more natural resources lead to economic growth

disadvantage

Answer 20

more resources mean more the production capacity. But it costs a lot of money to find new natural resources, which many countries may not have the means to afford.

Question 21

How does an investment in new capital and infrastructure lead to economic growth

Answer 21

Enables firms to expand their productive capacities. Could lead to an increase in scale hence leading to eocnomices of scale and lower average costs. The efficiency of production and hence output rises.

Question 22

How does technical progress lead to economic growth

Answer 22

New inventions and production methods can lead to increase in productivity of existing resources in industries.

Question 23

How does an increase in quality or quantity in human resources lead to economic growth

Answer 23

A larger and more productive workforce will increase GDP. More skilled, knowledgeable and productive human resources thus help increase economic growth.

Question 24

Methods to increase quantity of labour (expansion of work force)

Answer 24

Cutting income taxes - may motivate more people to work
cutting unemployment benefits - forces people to work
Increase the retirement age
Inward migration

long run - increased birth rate

Question 25

How does reallocation of resources lead to economic growht

Answer 25

Moving resources from less-productive uses to more-productive uses will improve economic growth.

Question 26

What are the benefits to economic growth

Answer 26

Greater availability of goods and services to satisfy consumer wants and needs.

Increased employment opportunities and incomes.

In underdeveloped or developing economies, economic growth can drastically improve living standards and bring people out of poverty.

Increased sales, profits and business opportunities.

Rising output and demand will encourage investment in capital goods for further production, which will help achieve long run economic growth.

Low and stable inflation, IF growth in output matches growth in demand.

Increased tax revenue for government (as incomes and spending rise) that can be invested in public goods and services.

Question 27

What are the drawbacks of economic growth

Answer 27

Could lead to a rise in unemployment - Technical progress which replaces labour.

Natural resources may get depleted

increase negative externalities - pollution, deforestation, health problems, etc

Inflation - if supply doesn’t rise at the same rate demand does.

Widens income inequalities - Rich investors and businessmen gain more than the working class and poor during growth