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Macroeconomics > Economic growth > Flashcards

Economic growth Flashcards

1
Q

What is economic growth measured as?

A

A change in GDP

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2
Q

What is GDP?

A

The value of finished goods and services within a time period

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3
Q

Why do you only count finished goods and services when measuring GDP?

A

To avoid counting things twice

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4
Q

How do we account for differences in population?

A

By using GDP per capita

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5
Q

What is the difference between ‘nominal and ‘real’ GDP?

A

Nominal is the raw figure, whereas real takes into account inflation

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6
Q

What constitutes a recession?

A

Two quarters of negative economic growth

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7
Q

What does GDP ignore?

A

Things that do not have monetary value, such as happiness, personal wellbeing and the environment

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8
Q

What type of work does GDP fail to measure?

A

Informal work in the home

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9
Q

What issue can GDP be seen as contributing to?

A

Environmental problems

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10
Q

What does short term growth tend to depend upon?

A

Where a country is in the economic cycle

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11
Q

Why can certain countries undego periods of disproportionately rapid economic growth?

A

During post war construction

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12
Q

What tends to happen to growth as per capita incomes rise?

A

It slows

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13
Q

What is doughnut economics?

A

The idea that we need to find a balance between improving people’s lives and lifting them out of poverty while also protecting the environment

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14
Q

What would doughnut economics require?

A

A complete re-evaluation of economics, as we must find a way to help the disadvantaged while simultaneoulsy adhering to an environmentally friendly growth limit

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15
Q

What can GDP give a distorted picture of?

A

Living standards

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16
Q

What type of inequality can GDP hide?

A

Regional

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17
Q

List some of the potential trade offs for a rise in GDP

A
  • Cut backs to working conditions
  • Decreased leisure time due to longer hours
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18
Q

What does GDP not account for the depreciation of when production is high?

A

Capital

19
Q

What doesn’t GDP take the cost of into account?

A

Servicing debt

20
Q

List the different things that GDP fails to value

A
  • Leisure time
  • Health
  • Education
  • Environment
  • Activities conducted outside the market
  • Income inequalities
  • Increases in variety
  • Increases in technology
  • The positive/negative value that society places on certain types of output
21
Q

Why doesn’t GDP effectively account for happiness?

A

Because many of the things that cause happiness are not bought or sold

22
Q

How can GDP be seen as understating improvements in living standards?

A
  • The average work week in the US has decreased from 60 to 40 hours
  • Life expectancy, average levels of education and health have risen dramatically
  • Since 1970, air and water in the US has generally been getting cleaner
  • New technology has developed for entertainment, information, travel and wealth
  • A much wider variety of food and clothing is available now compared to just a few decades ago
23
Q

How can GDP be seen as overstating improvements in living standards?

A
  • Crime rates, traffic congestion and income inequalities in the US are all higher now than they were in the 1960s
  • A number of services previously provided by women outside the market are now provided within the market economy, and are therefore counted as GDP
24
Q

What are the benefits of GDP?

A
  • It measures production
  • Indicates whether a country is materially better off in terms of jobs and incomes
  • In most countries, higher per capita incomes correlate with better health, education and environmental protections
25
Q

How can economic growth cause inflation?

A

The extra demand puts pressure on businesses and they might find they cannot supply everyone. In this situation, many businesses increase their prices to deal with the extra demand

26
Q

Give a counter to the idea that economic growth causes inflation

A

In the long term, businesses will often grow their production capacities, meaning they won’t need to put up their prices

27
Q

How can economic growth cause pollution?

A

The extra output leads to increased waste production and greenhouse gas emissions

28
Q

Counter the idea that economic growth causes pollution

A

Since the 1970s, air and water in the US has generally been getting cleaner in spite of economic growth

29
Q

How can economic growth cause resource depletion?

A

Extra production can use up finite natural resources. For instance, if we build on green land, we can never get this resource back

30
Q

Counter the idea that economic growth causes resource depletion

A
  • We can now recycle more efficiently
  • Synthetic products are being developed at a faster rate
31
Q

How can econoic growth cause a trade deficit?

A

As we get richer, we can afford a wider range of foreign goods

32
Q

Counter the idea that economic growth causes a trade deficit

A
  • You could use protectionism
  • You could build trade relationships to increase exports
33
Q

How can economic growth cause inequality?

A

Since WW2, GDP has doubled but median incomes have only grown by 40%. This means that economic growth has disproportionately benefitted the rich

34
Q

Counter the idea that economic growth is undesirable because it produces inequality?

A
  • Inequality can provide an incentive for people to work harder
  • Median incomes have risen, meaning most peoples’ standard of living has increased regardless
  • Progressive taxation can be used to redistribute income
35
Q

How does economic growth cause the disease of affluence?

A
  • Higher incomes can make you less healthy, as there is more opportunity to engage in vices
  • The wealthy travel more
  • There could be a reduction in manual labour, causing people to become sedentary. This is problematic in the UK, as this is another burden that will be placed upon the NHS
36
Q

Counter the idea that economic growth causes the disease of affluence

A
  • You could tax unhealthy purchases
  • More leisure and less work could be good for health and wellbeing
  • As we get richer medical care improves, allowing us to negate many of the downsides
37
Q

How does economic growth raise standards of living?

A

If we have more goods but the same amount of people, per capita incomes will rise

38
Q

Counter the idea that economic growth raises living standards

A

A rise in per capita incomes usually comes at the cost of a drop in leisure time

39
Q

How can economic growth lower unemployment?

A

Businesses can afford to employ more people. The extra output requires increased labour, so more jobs are created

40
Q

Counter the idea that economic growth lowers unemployment

A

Workers can be replaced by machines as businesses look to produce in a more cost effective manner

41
Q

How does economic growth create future prosperity?

A

If economic growth is stable then businesses are more likely to take risks, invest and make long-term decisions

42
Q

Counter the idea that economic growth creates future prosperity

A
  • Ecological destruction doesn’t indicate much future prosperity
  • Economic growth can be undone by external events
43
Q

How can economic growth improve public finances?

A

If we’ve grown, more people are in work. This means the government is receiving more tax revenue and giving out less transfer payments

44
Q

What could improved public finances be spent on?

A
  • Reducing taxes
  • Improving public services
  • Paying down the debt

Macroeconomics (7 decks)

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