Economic Growth Flashcards
Define Macroeconomics
the study of large economic systems
(whole countries or area of the world)
What is Economic Growth?
the value of all incomes in an economy rising
How do you Measure Economic Growth?
Gross Domestic Product(GDP) measures a country’s output for the year
What’s an Advantage of GDP?
It is an international measure of economic growth. Comparisons can be made between countries
Limitation of GDP (1)
Inflation
price increase means a higher value of output but not necessarily a growth in economy
Limitation of GDP (2)
Population Change
growth in population will result in more goods sold. this will offset the growth in GDP
Limitation of GDP (3)
Statistical Errors
lots of data collected to calculate the national income.
data may be inaccurate or left out
Limitation of GDP (4)
Value of Home Produced Goods
some goods are not traded and will not be recorded
(eg. garden crops)
Limitation of GDP (5)
The Hidden Economy
some trading or paid work will not be recorded.
(personal favours)
Limitation of GDP (6)
GDP and Living Standards
not necessarily equal
be aware of:
environment
quality of goods and services
leisure time
Limitation of GDP (7)
External Costs
GDP does not take into account the environmental costs
Economic Cycle
Boom, Downturn, Recession, Recovery
Boom
Peak of the cycle
GDP grows fast
Economic activity in high
Firms expanding
Downturn
GDP growing at a slower rate
unemployment rises
demand stagnates
firms start leaving
Recession(less severe) or Depression
Bottom of the cycle
GDP may be flat
widespread poverty
bankruptcies
