Economic Growth Flashcards
Theme 2; trade cycle
What causes an increase in economic growth
Improvement in the quality and quantity of FoP, which increases LRAS (increasing potential level of output of an economy)
How does improvement in labour (FoP) lead to economic growth
Size of workforce links to ageing population or net migration leading to larger pool of workers to hire from
Increased education and apprenticeships will lead to upskilling workers that increases productivity
How can enterprise promote economic growth
Governments can decrease taxes and increase in subsidies to promote ventures which lead to increased employment, innovation and investments.
Factors that promote economic growth that are not FoP or AD
Efficiency - allows for less usage of resources
Technological advances - can reduce AC and promote consumption
What is actual growth?
Percentage change in GDP over time
What is potential growth
A change in productive potential of an economy over a long period of time so a shift in LRAS or PPF
What is an output gap
The difference between the actual GDP and long run levels of GDP
What is a positive output gap
When actual GDP is bigger than predicted GDP
Why do trade cycles exist?
This is due to supply and demand shocks
List some characteristics of a boom
High national income
High net imports
High inflationary pressures
Define a recession
When GDP falls for two consecutive quarters
List some characteristics of a recession
High unemployment
Low inflationary pressures
low spending high saving
What is hysterisis
An economy may never fully recover from a deep recession due to permanent loss of labour e.g early retirement
