Economic Growth Flashcards
What are the 2 ways economic Growth is defined?
An increase in real GDP occurring over a period of time
An increase in real GDP per capita occurring over a period of time
What does an increase in real GDP measure?
Military and political preeminence
What does an increase in real GDP per capita measure?
Standard of living
What institutional structures promote growth?
Property rights, patents/copyrights, effiecient financial institutions, literacy/education, free trade, and competitive markets
Real per capita GDP is also called
Standard of living
A growing economy is better able to deal with
Poverty through social programs
Growth does what regarding scarcity?
It lessons the burden of scarcity
What causes an economy to grow?
Adding any production or technology factors to an economy
On a PPC curve, the curve shifting right or left is caused by
Supply factors
Movement from points on the curve is caused by
Demand it efficiency factors
FOP=
Factors of production(supply factors)
If any economy hasn’t reached its potential growth what can it do?
Increase AD sufficiently to sustain full employment
Or
Efficiently use additional resources to maximize output
What does economic growth do??
Examines what expands an economy and analyzes public policies designed to increase economic growth
What are the 6 “ingredients of growth”?
- Quality/quantity of natural resources
- Increased quality/ quantity of labor
- Increase in capital goods
- Technology improvement
- Full-employment of resources
- Productive and allocative efficiency
What are supply factors?
They relate to the physicals ability of the economy to expand
What are the 4 supply factors?
Natural resources, labor, capital goods, technology
What are demand factors?
They relate to realizing potential growth
What demand factor relates to growth?
Full employment of resources
How can full employment of resources be achieved?
With a growing level of AD
What are effieciency factors?
Related to realizing economic efficiency
What is productive efficiency?
Least costly(min ATC)
What is allocative efficiency?
Society’s optimal way aka. Full employment(MC)
What does a nations real GDP depend on?
The input of labor and labor productivity
How can you calculate real GDP?
Worker hours times output per worker
What is the labor participation rate?
The percentage of the working age population in the labor force
What does it mean to be in the labor force?
Actively seeking employment, and willing and able to work
What are labor inputs?
The size of the work force and the average hours of work
What is labor productivity?
Technological advances, quantity of capital, education/training, allocative efficiency
What is the anti-growth view?
Critics of economic growth say that industrialization and growth cause problems
What problems do anti-growth viewers see with economics growth?
Pollution/environment problems, during times of growth the government doesn’t try to fix poverty, homelessness, or discrimination
Graphically what happens during economic growth??
LRAS and SRAS increase and AD shifts to the right
What is the annual growth rate in the US since 1948?
3.1%
What has the real GDP per capita gain been since 1948?
2%
What is hidden about economic growth?
Improved products and services, added leisure time, environmental effects, and international comparisons
Improvement in products and services is used to measure
Well-being
Compared to other countries the US grows
Slower but we are much bigger
What policy demand wise does the government take to grow the economy?
Fiscal/monetary policy to increase GDP and reduce unemployment
What does the government do supply wise to grow the economy?
Education/training polices, tax polices
What is a deficit?
Spending more than you make
What is a debt?
An accumulation of all past debts
What is a budget deficit??
How much the government spends more than they make
What is public/national debt?
The accumulation of all last deficits and surpluses of the US governments
Most state governments are required to do what with their budgets?
Have a balanced budget
What is an annually balanced budget?
It is pro-cyclical and doesn’t fix inflation or recession
What does it mean to be pro cyclical?
Working in accordance to the business cycle
What is a cyclically balanced budget?
It is counter cyclical; it fixes economic issues like inflation and recession
In the recessionary phase under a cyclically balanced budget what would the government do?
Lower taxes and increase spending which cause a deficit
During prosperity under a cyclically balanced budget the government would do what?
Raise taxes, increase spending, and use the surplus to lay off the debt accumulated during the recession
What is the problem with a cyclically balanced budget?
The phases aren’t equal magnitude earthquake
What is functional finance?
Federal finance that provides for non-inflationary full employment should be the main concern
What is our US national debt?
19 trillion
What has caused such a large debt for the US?
Wars/defense spending, recessions, tax cuts, lack of political will
Why should we fear our large debt?
Foreign ownership of debt, and the government’s debt often causes the crowding out effect to occur
Why shouldn’t we fear our large national debt?
The relative size of the debt is less than it was in 1950, compare for other countries we have a small debt, we gain interest from the national debt, the US governments owns most of the debt
