Chapter 9: Economic Growth Flashcards
What is sustainable growth?
It is achieved when the economy grows at a strong and stable rate without resulting in significant environmental degradation and resource depletion for future generations.
What is fiscal sustainability?
It is the ability of a government to maintain its financial health over the long term, ensuring it can meet its spending commitments without accumulating unsustainable level of debt.
Briefly explain what Progressive Tax System is about
- Govt. raises tax rates for higher income groups.
- This would generally increase government revenue and allow them to redistribute the income which can be in the form of transfer payments to people of lower income such as the retirees, sick and disabled etc.
- they have higher disposable income and better afford essential goods and services→inclusive growth.
What is inclusive growth?
The economy grows at a strong and stable rate without resulting in significant worsening of income or wealth inequality.
Define AD
AD is the total demand by households, firms, government and foreign sector on final goods and services that are domestically produced in the economy at various price levels.
Define AS
It is the total output that firms in the economy are willing and able to supply at different price levels in a given time period.
Define economic growth
It can be defined as the increase in RGDP or an expansion in the productive capacity of an economy.
Define AG
It occurs when there is an increase in the equilibrium level of real NY
Define potential growth
It is the rate at which the economy could grow if it were to use all if its resources. It is achieved when there is an expansion of productive capacity of the economy
Define multiplier
The multiplier process explains how a change in AD will lead to a more than proportionate change in national income
What is monetary policy?
It is the adjustment of interest rates via the regulation of the money supply in a country.
Describe the varying bank rate
The bank rate is the interest rate charged by the central bank for loans made to commercial banks. When the central bank raises bank rate, commercial banks are less willing to provide loans to the public.
This reduces money supply, raising i/r.
What is slow growth?
It is a period where real national output is rising at a slower rate
What is recession?
It is a period where RNY falls over a period of a year.
