Analysis of macro-economic performance Flashcards
How is economic growth expressed as an AS curve?
A shift to the right
Determinants of economic growth?
- Resource availability
- Resource quality
- International competitiveness
Explanation of resource availability changing economic growth?
- Changes in the quantity of labour resources available. The size of the workforce and its inventory to accept employment.
- Changes in the quantity of capital resources. Requiring investment in machinery and plant, and physical infrastructure
Explanation of resource quality changing economic growth?
- Increased quality of resources leads to increased factor productivity .
- Sources of increased factor productivity includes:
- new technology
- education and training
What does economic stability refer to?
Economic stability refers to minimising the fluctuations associated with the trade or business cycle.
How does cyclical unemployment occur?
- When there is a negative output gap.
- Aggregate demand is insufficient to permit full employment.
- It will arise when real GDP falls
How is structural unemployment affected by AD and AS?
- It’s not really affected by aggregate demand
- The causes of structural unemployment reflect restrictions on long run aggregate supply
When does Demand pull inflation occur?
-When an expansion of aggregate demand exceeds the full employment capacity of the economy to supply output. The supply is inelastic
When does cost-push inflation occur?
-When unit costs of production rise due to wage or material costs increasing in excess of productivity, shifting AS to the left.
What’s the relationship with economic growth and current account deficit or surplus?
-Strong economic growth may result from steady increases in productivity that also increases an economy’s trade competitiveness by improving the quality of the products, or contributing to a reduction in costs.
