Economic Growth Flashcards
Economic growth cycle diagram (4+)
Wavy line = actual growth
Straight line = trend growth
Trough = recession or slump
Peak = boom
Parts of economic growth diagram (4+)
Increase AD = boom = economy growing quick
Reduced AD = recession = negative economic growth for 2 quarters
Increased AD = recovery = begins to grow = + economic growth
Increase trend growth = Long Run
What a negative output gap (3)
Difference between actual + trend output when below trend output
Spare capacity
Downward pressure on inflation
What positive output gap (3)
Difference between actual and trend output when above trend output
Boom = overheating = full capacity
Upward pressure on inflation
How to solve posit e output gap (3)
Higher taxes = Increase ps tax = reduced demand
How to solve negative output gap (4)
Increase FoPs = capital improved = increase productivity =growth
Benefits to economic growth (3+)
Increase demand for labour = increased employment + income
Firms are succeeding = increase wages = increase SoL
Tax rev increases = improve services without increasing prices
Costs of economic growth (6)
Income inequality
High wages = more responsibility = high stress levels
Demand pull inflation
Cost push inflation
Finite resources used up
Inspdustrial exapnsion = negative externalities
Is a recession bad (5+) - 3 firms and 2 gov
Firms close = unemployment
Firms stop hiring = young badly affected
Gov spending increases on unemployment benefits
Tax falls = increases gov borrowing = deficit
Investment falls = consequences for LR
Recession good (2)
Firms have to face up to inefficiencies
Be fit in LR more efficient
Ways to create LR economic growth (4+)
Supply side factors:
Innovation
Invest in new tech
Increase spending on education + training
Increase pop size through immigration = increase labour
Facts (4+)
2000-2008 continuous gdp growth of 3% per year
2008 = recession for several months
Full recovery achieved in 2014
2008-2011 = unemployment rose 2.7m = 8%
