Ch 8- Economic Growth

Question 0

What are 4 ECONOMIC benefits of economic growth

Answer 0

• increase in consumption
• higher levels of employment
• increasing real income
• increase demand for capital

Question 1

List 5 ECONOMIC costs of economic growth

Answer 1

• structural unemployment
• inflation
• resource depletion
• negative externalities (e.g. More factories= more fumes, noise etc.)

Question 2

Define economic growth

Answer 2

The increasing capacity of the economy to satisfy the wants of its members.

(Increase in amount of G&S economy can produce above in thelast year)

Question 3

What are the macroeconomic goals?

Answer 3

• growth (3-5%)
• inflation (2-4%)
• low unemployment
• balance of payments

Question 4

What happens if economic growth is too slow?

Answer 4

Difficult to achieve high employment

Question 5

What happens if growth too fast?

Answer 5

Difficult to control inflationary pressures and demands on scarce resources.

Question 6

What does growth enable us to have?

Answer 6

Higher standard of living

Question 7

What is GDP?

Answer 7

GROSS DOMESTIC PRODUCT

• measure Econ performance
• the total market value of all final goods and services produced in a country during a period of time

Question 8

How does GDP measure growth?

Answer 8

Measures C + G + I + NX

Question 9

What are the setbacks of using GDP?

Answer 9

• no describe distribution of benefits.
• not non-market production (e.g. Housework, charity work, and voluntary work) takes up big part of welfare.
• improvement in quality of G&S

Question 10

What are examples of leading indicators? (4)

Answer 10

• building approvals
• levels of stock held by retail firms
• manufacturers’ new orders
• consumer expectations

Question 11

What are examples of coincident indicators (10+ but only listed 5)

Answer 11

• cement production
• job advertisements
• sales of consumer durables
• consumer prices
• production of building materials

Question 12

What are examples of lagging indicators? (5)

Answer 12

• interest rates
• consumer debt
• duration of unemployment
• bankruptcies
• CPI

Question 14

What are the characteristics that associate with the boom phase of the business cycle.

Answer 14

• high
• low unemployment
• more investment
• high inflation
• high imports
• higher interest rates but more borrowing

Question 15

Define the trough phase of the business cycle

Answer 15

The trough is when the level of aggregate spending is below the economy’s potential

Question 16

What are the characteristics that are associated with the trough phase?

Answer 16

• higher unemployment
• low consumption (especially consumer durables)
• lower prices
• higher savings

Question 28

Define the boom phase of the business cycle

Answer 28

The boom is a period when the rate of economic growth and the general level of economic activity is above average.