Economic Growth Flashcards
How will land help Economic Growth?
- If you naturally have resources which are high in demand, e.g oil you will experience economic growth
How do changes in demography affect economic growth?
- Countries with a high birth rate will have increasing numbers of workers
How do changes in participation rates affect economic growth?
- Proportion of the population of a certain age who are either in work or seeking work
- Increase in people staying in education decreases the size of the work force
How does immigration affect economic growth?
- Can help increase the size of the labour force
- In the long run you need to maintain quality of labour input
- Workers need to be sufficiently educated
- Workers need to be flexible
- Workers need to contribute to change
How does capital affect economic growth?
- Stock of capital needs to increase over time to sustain economic growth
- There must be sustained investment in the economy
- Investment doesn’t always mean growth, e.g housing investment will not increase GDP
How does technology affect economic growth?
- Cuts average cost of production of a product
- Creates new product for the market
How does efficiency affect economic growth?
- The way factors of production are put together are vital for economic growth
- In market economies competition leads to greater efficiency
- Government policies may stimulate competition, e.g privatisation, deregulation and control of monopolies
What is the peak or boom in the economic cycle?
- National Income is high
- Likely to be working beyond full employment
- Consumption + Investment will be high
- Taxes, wages and profits increasing
- Inflationary pressures and imports to meet consumer demand
What is the downturn in the economic cycle?
- Output and income fall
- Consumption and investment fall
- Taxes fall and government spend more on benefits
- Wages demands go down as unemployment rises
- Imports decline and inflationary pressure eases
What is the recession or depression in trough or slump in the economic cycle ]?
- At bottom of the cycle the economy is said to be in a recession or depression or trough or slump
- Economic activity is at a low
- Prices will be falling and inflationary pressures easing
What is the recovery or expansion in the economic cycle?
- National income and output begin to increase
- Unemployment falls
- Consumption, investment and imports rise
What are some demand-side shocks which affect aggregate demand?
- Housing market bubble bursts, prices too high for housing, eroding consumer confidence
- Stock market may crash, reduces wealth of individual and they stop spending thus AD falls
- Central bank may raise interest rates, reduces consumer spending on durables and investment spending causing recession
What are some demand-side shocks which affect aggregate demand? (2)
- Government may raise taxes or cut government spending, lowers AD
- World economy may go into recession, UK exports decrease sending into recession
- Sharp rise in value of pound against other currencies, reduces competitiveness, exports decreases and sends into recession
What are some supply-side shocks which affect aggregate demand?
- Large rise in world commodity prices which raise PL in the UK, rise in import value reducing aggregate supply
- Outbreak of trade union militancy could see wage increases, increasing PL and reduce aggregate supply
What is an output gap?
- Difference between actual level of real GDP and its estimated long term value at a point in time
