C31 - C33 Economics Growth Flashcards

1
Q

What is economic growth?

A

Increase in the productive potential of the economny

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2
Q

How is economic growth measured?

A

As a percentage of the change in real GDP

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3
Q

What is long-run economic growth (a.k.a potential growth) caused by?

A

Q^2 CELL

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4
Q

How is long-run economic growth measured?

A

The trend rate of percentage change in real GDP

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5
Q

What is a boom?

A

A period of rapid economic growth ( fall in unemployment and rise in inflation)

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6
Q

What is a recession?

A

negative economic growth for 2 consecutive quarters

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7
Q

What is recovery?

A

When economic growth starts to occur again

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8
Q

What’s a negative output gap?

A

When the actual output is below the trend output

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9
Q

What is a positive output gap?

A

When the actual output is above the trend output

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10
Q

What are the benefits of economic growth?

A

Decrease in unemployment
Higher wages
Better standard of living
Firms get more profit and invest more
Increase in the production potential
Improvement to public sectors
Environmental benefits
More tax revenue so less borrowing

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11
Q

What are the costs of economic growth?

A

Income inequality for low-skilled workers
Higher wages mean more responsibility meaning more stress
Demand-pull and cost-push inflation
High wage –> more imports –> imbalance to balance of payments
Negative externalities
Finite resources used up

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12
Q

Why is a recession bad?

A

Firms close down
More unemployment
Less Tax revenue
Less investment

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13
Q

What benefits may come from a recession?

A

Discount retailers get more sales
Firms may fix inefficiencies so in the long run are more efficient

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