Economic Growth

Question 1

Economic Growth

Answer 1

Growth in GDP over time

Question 2

GDP

Answer 2

Gross domestic product is the total value added of goods and services produced in a country in a year

Question 3

Rate of Growth

Equation

Answer 3

(Change in GDP/Original GDP) x 100

Question 4

GDP per capita

Answer 4

GDP divided by the population

Question 5

Boom and Recession

Answer 5

Boom - A period of high economic activity and high levels of employment
Recession - A period when the country’s GDP falls for two or more consecutive quarter

Question 6

Determinants of economic growth

Answer 6

• Investment - spending on capital goods, ability to produce more goods and services
• Change in technology - improvements of the quality of capital goods, produce more output
• Education and training - Quality and quantity of work
  done, more skilled workers, higher output
• Size of the workforce - Economy can produce more if more labour, labour is part of the factors of production
• Natural resources - Discovering or developing natural resources, stimulus to economic growth eg natural gas or oil
• Government policies :
  Allocating resources
  Investment in infrastructure

Question 7

Benefits of economic growth

Answer 7

• Rise in material living standards - more output to consume. Higher average income rises.
• Reduction in poverty - Output and income rises, more tax revenue use to raise the living standards of people with lower incomes.
• Rise in the welfare of population - Collect more tax, spend on health and education. Improve the general welfare.
• Rise in employment - more workers required to produce extra output.

Question 8

Costs of economic growth

Answer 8

Environmental cost - pollution (oil spills, transport pollution)
Air pollution - High energy needed, causing air pollution. China high economic growth, high air pollution
Loss of non renewable resources - Using natural resources that cannot be replaced, cannot be used in the future
A lower quality of life - More stressful and busier
Inequalities of income and wealth - Benefits are unevenly spread.
Inflation - A period of economic growth can lead to price level rising as when total demand increases and supply rises at a slower rate causing demand pull inflation