DETERMINANTS OF ECONOMIC GROWTH Flashcards
What is the difference between potential and actual economic growth?
Potential growth is the economy’s capacity to produce more; actual growth is based on household, firm, and government spending.
What is the “3 P’s” framework for potential economic growth?
Population, Participation, and Productivity.
What percent of Australia’s population growth is due to migration?
60% from net migration.
How does population growth affect demand?
It increases demand for goods and services, boosting demand for labor.
ow does migration impact economic growth?
Migrants, often of working age and skilled, increase the labor force and boost economic growth.
What is the participation rate?
The percentage of people over 15 in or seeking paid work.
What was Australia’s participation rate in July 2023?
About 67%.
Why is higher female participation important?
It raises household income, meets cost of living needs, and increases aggregate demand.
What is productivity?
The efficiency of turning inputs (like labor, capital) into outputs.
How does productivity affect goods and services?
Increases efficiency, often reducing costs and improving product quality.
How can capital productivity be improved?
By using better capital and training workers to use it effectively.
What is labor productivity?
Output per worker; it grows through skills, training, and experience.
How does productivity relate to leisure time?
Higher productivity allows the same output in fewer hours, increasing leisure time.
How does economic growth impact income and welfare?
increases real incomes, boosts demand for resources, and improves living standards.
What inequality risk does economic growth pose?
Benefits may not be evenly spread, risking income inequality.
