economic growht

Question 1

define economic growth

Answer 1

increase in real gfp in an economy in a year cuased by and increase in AD or LRAS

Question 2

what are the two under growth of econ growht

Answer 2

shoer run growth

long run growh

Question 3

short run growht is known as

Answer 3

actual growth

Question 4

define short run growht

Answer 4

increase in AD in an econ

CUZ using up spare apapcity

to increase output of goods and services in and economomy

whihc increases RGDP

Question 5

Which two grphs can we use to show increasing short run growth

draw em

Answer 5

LRAS and AD shift right
PPF curve increase within) goods and services

Question 6

in short run economic growth AD shifting righ dhoed econ is using up spare capacity how

Answer 6

had -veoutput gap but now closing it by moving twrds Yfe

as we move towards it with shifting AD we close it

as econ prodcuing more g/s and suing up spare capacity to do so

Question 7

state the 5 reasons why short run eocn growht occurs

hint remener AD

Answer 7

lower interest rates

lower income /corp tax

higher consumer and business confidence

hgiher gov spending

weaker ER

Question 8

WHY DOES LOWER Interst rate boost AD

Answer 8

Cheaper for consumer and bs to borrow to invest and consume

weakens exchange rate - hot money outflows look for best interst rate - sell off currency - increases supply of £

exports now cheaper making em internationally competitive whihc bosts AD

Question 9

Explain how lower income and corporation tax casues short run growth

Answer 9

more disposable income so more consumer spedning = more ocnsumptuio

more retained profit for firms whihc can use to invest

Question 10

explain how high consumer and business confidece cna increase short run growht

Answer 10

leads to more consumption and investment which boosts AD

Question 11

Explain hwo a weaker exchange rate causes short run growth

Answer 11

boosts X-M as exports cheaper

Question 12

what is long run economic growht

Answer 12

increases in LRAS which increase productive capapcity of an economy

Question 13

what does increased productive capacity of an economy

Answer 13

has potential to grow a faster rate

dont mean growing at faster rate just got potentia

Question 14

what 2 graphs can we use to show long run economic growht

Answer 14

lras ad shift lras - but straight line

production possibility frontier shifting outwards

Question 15

how do we know from our grpah that the long run eocnomic growth has occured

Answer 15

the full employment level of output has incrreaed from yfe 1 - yfe 2

Question 16

what are the 3 reasons LRAS shifts righ t

Answer 16

casue of increases in the

quantity

quality

productive efficiency of an economy

Question 17

what are the 6 reasons LRAS will shift right

Answer 17

increased labour productivity

increased workforce size

increased investent

infrastructure imporvements

increase in competiton

new resource discoveries

Question 18

explain how increasing labour productivity will increase LRAS

Answer 18

INCREASES QUALITY OF LAOBOUR FROM TRAINIGN

Question 19

explain how increased workforce size shifts LRAS

Answer 19

e.g thorugh immigtaition

we ahve increased qunaityt of labour

Question 20

explin how investment increases LRAS

Answer 20

New efficient tech /innovation means we have increased the quantity of capital if tis coming in and increases quality if its an upgrade

decreases long run costs of production for a firm causing prod eff to increase which causes LRAS to shift right

Question 21

explain how infrastructure imporvements shift LRAS right

Answer 21

e.g transport reduces long run costs of production as its cheaper and easier to tranpsort goods

cheaper and easier to access raw materials = PRODUCTIV EEFFICIENCY

if tis physical such as hospital or schools this increase quanittiy of capital

Question 22

explain how increased competiton is a cause of long run econ growth i.e shifts LRAS right

Answer 22

firm in econ must find ways to reduce LR COP to be comp

therfore boost PE shifting LRAS right

Question 23

explain how new resource discoveries can cause LRAS to shift right

Answer 23

this counts as land FOP

therfore increasing quantity of land whihc shifts LRAS to the right