Economic Growth Flashcards
Define :
The growth in the value of output of the economy, in the long run an outwards shift in the PPC.
Short term Growth
Actual growth - Increase in short term growth means an increase in aggregate Demand.
Aggregate Demand Equation
C + I + G + ( X - M ) Consumer spending Investment Government Spending Exports Imports
Short term Economic Growth (PPC)
Long term Economic Growth (PPC)
Causes for Short term Growth
Reduction in Interest rates
Increase in government spending
Reduction in taxations
Increase in investment
Increase in exports
Demand Pull inflation
Moves towards the overall potential of growth, closer to the YFE
Causes for Long run growth
Increase in Productivity
Advancing of technology
Increase in investment
Improvement of infrastructure
Increase immigration
Productivity
Improves the quality of labour
Technology
Advancement of quality and quanitity of capital
Investment
Quality and quantity increases
Immigration
Increases the size of the labour pool
AD/AS diagram
Increase in potential growth is the increase in long run aggregate supply. Increase in the productive capacity of the economy.
Difficulty in measuring economic growth
Economic activity not accounted for
Affects of inflation needs to be removed
