Economic Growth Flashcards
Objectives
economic growth e.g. UK trend rate is 2.5
Reduce unemployment
Maintain low and stable inflation: 2% or +-1%
Equity
Policies
Monetary
Fiscal
Supply-side policy
Two types
actual growth
potential growth
Nominal GDP
GDP valued at current prices that is unadjusted for inflation
current price= nominal GDP
Real GDP
nominal GDP adjusted for inflation
constant price= real GDP
How is GDP measured?
sum of all goods and services produced in a country in a year.
sum of all incomes earned in a country in a year.
sum of expenditure in a country in a year.
Output measure
value of goods and services produced by all sectors
Expenditure measure
value of the goods and services purchased by households and by government, investment in machinery and buildings.
Also includes the value of exports minus imports
Income measure
value of income in terms of profits and wages
Real GDP calculation
Nominal GDP x price index in base year/ current price index
What is GDP used for?
Forecast changes in economy–> plan for future
Make comparisons between countries
General pros of increase in GDP
experiencing increase in incomes, output and spending. More choice, higher standard of living
General cons of increase in GDP
people may work longer hours
more work pressure
GDP per capita
real GDP/population
Benefits of growth to employees
incomes and wealth rises
wealth in form of assets e.g. shares and houses
