Economic growth Flashcards

1
Q

What is GDP

A

(Gross domestic product) is the measure of the size of the country’s economy

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2
Q

Ways to measure GDP

A

1) Output - the total value of goods and services (‘output’) produced
2) income
3) Expenditure - what everyone in the country has spent

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3
Q

Limitations of GDP

A

1) Hidden economy - unpaid work isn’t captured in official figures, such as caring for an elderly relative
2) Inequality - doesn’t tell us how income is split across a population; rising GDP could result from the richest getting richer, rather than everyone becoming better off
3) Just because GDP is increasing, it doesn’t mean an individual person’s standard of living is improving
4) Doesn’t take into account the environmental impact
5) doesn’t take into account well-being (health, relationships, education, skills and finances)

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4
Q

How does measuring GDP help a business

A

Able to judge when to expand and hire people, and it lets government work out how much to tax and spend

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5
Q

How often are GDP figures measured

A

Every month, but the quarterly figures (3 months) are the the most widely watched

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6
Q

What would the quarterly GDP look like in a growing economy?

A

Slightly bigger than the quarter before, a sign that people are doing more work and getting (on average) a little bit richer

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7
Q

Why do economists, politicians and businesses like to see GDP steadily rising?

A

Usually means people spend more, more jobs created, more tax is paid and workers get better pay rises

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8
Q

What does it mean when GDP is falling

A

Economy is shrinking

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9
Q

What is a recession

A

When two quarters in a row have a negative GDP

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10
Q

What does a recession mean for businesses

A

Pay freezes and lost jobs

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11
Q

What did the COVID pandemic cause for the economy

A

Forced the government to borrow hundreds of billions of pounds to support the economy

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12
Q

Why is it good when GDP is going up steadily

A

People will pay more tax simply because they’re earning and spending more. This means more money for the government to spend on public services, such as schools, police and hospitals

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13
Q

What was the % of borrowing during COVID pandemic

A

Equivalent to 14% of GDP in the first year, the highest proportion since WW2

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14
Q

What are the stages of a business/trade cycle

A

1) Boom
2) Recession
3) Slump
4) Recovery

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15
Q

What does Output refer to when measuring GDP?

A

The total value of the goods and services produced by all sectors of the economy - agriculture, manufacturing, energy, construction, the service sector and government

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16
Q

What does Expenditure refer to when measuring GDP?

A

The value of goods and services bought by households and by government, investment in machinery and buildings - this also includes the value of exports, minus imports

17
Q

What does Income refer to when measuring GDP?

A

The value of the income generated, mostly in terms of profits and wages

18
Q

What are the characteristics of a Boom in a business / trade cycle?

A
  • high growth
  • high employment
  • high investment (got profit and confidence)
  • demand for goods and services is high
  • business operating close to full capacity ( using resources)
  • low stock levels
  • increased prices (costs increase, more disposable income) = inflationary pressure
19
Q

What would be the solution when the GDP is slowing down?

A

to increase interest rates

20
Q

What are the characteristics of a Recession in a business / trade cycle

A
  • demand slowing down
  • businesses become less optimistic
  • sales slow down
  • start to cut down on investments
  • unemployment creeps up
  • more stock