Causes of economic growth & trade cycle

Question 1

actual growth

Answer 1

econ growth measured as a change in RGDP

Question 2

Export growth

Answer 2

increase AD caused by increase X

Question 3

Economic growth

Answer 3

increase output in the economy which can be actual growth or potential growth

Question 4

Causes of LR econ growth (4)

Answer 4

Land
Labour
Capital
Technological progress

Question 5

Land

Answer 5

Natural resource available for production - renewable & non-renewable
Eg- UK exploit oil & gas in 70’s

EVAL- effective for developing countries not dev.

Question 6

Labour

Answer 6

Change demography
- increase BR … increase size of workforce … incrase qty

Change participation rates
- proportion of the working age pop seeking work so increase pop staying in ed … decrease size of labour
- increase workers taking early retirement … decrease labour force size
- increase W entering labour force bc increase wage rate/better child care

immigration
- increase migration … increase qty of labour but no impact on econ welfare bc income shared between large ppl so workers qual more important

Question 7

Capital

Answer 7

increase I on capital … more sustained econ growth

Question 8

Technological progress

Answer 8

decrease avg CofP of a product & creates new products for new markets

Question 9

Export led growth lead to ….

Answer 9

increase competitiveness & efficiency

Question 10

Causes of trade cycle

Answer 10

D Side Shocks - sudden….
- decrease in gov spending
- strengthening in Ex R
- increase tax
- financial market crash

S Side Shocks
-wars
- increase price of raw material
- increase wages
- weakening of Ex R

Question 11

Negative output gap

Answer 11

Acc output < potential output

Question 12

Positive output gap

Answer 12

Acc output > potential output
- FofP not used sustainable
- Labour market not at natural employment so no equi