econ growth

Question 1

define short run econ growth

Answer 1

an increase in production of goods and services that occurs without an economy acquiring additional factors of production

Question 2

define long run econ growth

Answer 2

increase in an economy’s productive potential

Question 3

what does lras show

Answer 3

potential output of an economy

Question 4

what are output gaps

Answer 4

An output gap is the difference between an economy’s actual growth and its trend growth

Question 5

whats a postive and negative output gap

Answer 5

A negative output gap is when growth is less than the trend rate
A positive output gap is when growth is more than the trend rate

Question 6

what are the benefits of econ growth ( IIFMM )

Answer 6

Increased demand for labour resulting in less unemployment
increased wages and better standards of living – depends on the rate of inflation
Firms making profits are more likely to invest helping shift out the PPF
More production may lead to more exports
More jobs = more tax = reduction in budget deficit