economic growth

Question 1

What causes short run economic growth

Answer 1

Caused by increase in AD

Question 2

What causes long run economic growth

Answer 2

Improvements in LRAS

such as

factors of production, land, labour, capital, enterprise

Question 3

what are the 2 graphs to represent short run growth

Answer 3

1. shift ad to the right
2. show a pps graph showing a point getting closer to the pps line

Question 4

what are the 2 graphs to represent long run growth

Answer 4

1. shift LRAS to the right
2. show a pps graph showing a curve shift outward

Question 5

what is actual growth,how often measured, what caused by.

Answer 5

% increase in countrys real gdp and it is usually measured anually. it is caused by increases in AD.

Question 6

what is potential economic growth,how caused

Answer 6

measured by the estimated annual change in a countrys potential gdp.

Potential growth is driven by improvements in long run.

Question 7

draw a trade cycle and label

and axis

Answer 7

positive output gaps, when actual is above potential

negative output gaps, when actual is below potential

boom, recession, slump

slump to recovery, to boom ,to recession, to slump.

y is gdp

x is time

Question 8

what are 4 characteristics in a boom

Answer 8

high inflation

high net trade

increase in investment

high interest rates

Question 9

what are 4 characteristics of a recession

Answer 9

negative wealth effect

exchange rates decrease

government spending increases

consumption decreases

Question 10

what is recession

Answer 10

negative economic growth for more than 2 consequitive quarters.