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Economics REVISION 1 (Micro) > Economic Growth > Flashcards

Economic Growth Flashcards

1
Q

What is economic growth

A

A long term expansion of productive potential

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2
Q

What is short term growth

A

Annual % change in real national output

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3
Q

What is long term growth

A

An increase in trend or potential GDP

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4
Q

Key factors affecting short run economic growth

A
  • interest rates
  • fiscal policy
  • commodity prices
  • exchange rates
  • trading conditions
  • confidence
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5
Q

Key factors affecting long run economic growth

A
  • capital investment
  • factor productivity
  • growth of the labour supply
  • research and development
  • innovation
  • enterprise and attitudes to risk taking
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6
Q

What are the main benefits of economic growth

A
  • higher living standards
  • employment effects
  • fiscal dividend
  • accelerator effect
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7
Q

Balanced growth

A

Regional balance
Urban/rural balance
Internal v external balance
Balance between consumption and investment

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8
Q

Sustainable growth

A

Needs of current generations
Macro economic stability
Financial stability
Environmental sustainability

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9
Q

Inclusive growth

A
  • Benefits of growth widely distributed
  • rising median per capita incomes
  • reducing poverty
  • improved opportunities for all
  • measures to tackle discrimination
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10
Q

How is it best to sustain economic growth in the long run

A
  • building trust/social capital
  • growing intra-regional trade
  • improving institutions and property rights
  • dynamic innovative private sector
  • macro policies to control inflation
  • focus on equity/fairness
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11
Q

Capital investments contribution to economic growth

A
  • provides an injection of demand for capital goods industries
  • economies of scale and better competitiveness lowers prices
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12
Q

Policies to attract inward foreign investment (a key source of extra demand and as a driver of growth)

A
  • soft loans/tax relief
  • trade and investment agreements
  • flexible labour markets
  • SEZs
  • high quality infrastructure
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13
Q

Risks of higher inflation and higher interest rates

A
  • fast growing demand can lead to demand pull and cost push inflation
  • central bank may decide to raise interest rates to control inflation
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14
Q

Environmental effects

A
  • negative externalities such as pollution and waste

- risk of unsustainable extraction of finite resources

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15
Q

Inequalities of income and wealth

A
  • rapid increases in RNI can lead to a higher level of inequality and social divisions
  • many of the gains may go to only a few people
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16
Q

Economic growth and inequality

A

-a rise in GDP can lift millions out of absolute poverty but can be accompanied by widening income and wealth inequality

17
Q

What is an output gap

A

The output gap is the difference between the actual level of national output and the estimated potential level and is usually expressed as a percentage of the level of potential output.

18
Q

Barriers to growth/development

A 
Poor infrastructure
Human capital inadequacies
Primary product dependency
Declining terms of trade
Savings gap; inadequate capital accumulation
Foreign currency gap and capital flight
Corruption, poor governance, impact of civil war
Population issues
19
Q

Infrastructure gap (barrier to development/growth)

A
  • increase supply costs
  • reduce mobility of labour
  • lack of competitiveness
  • less attractive for FDI
  • gender inequality
20
Q

Infrastructure gap

A

Zambia
Landlocked
Copper transportation on road- damages

21
Q

Human capital inadequacies

A
  • lack of education

- inequality

22
Q

Primary product dependence

A

Resource curse theory

23
Q

Strategies to reduce resource dependency

A
  • better government
  • stabilisation fund
  • higher taxes of resource profits
  • diversification e.g. Tourism
24
Q

What does economic growth flow from

A
  • an increase in the stock of capital inputs for investment in renewable energy
  • an expansion of the available labour supply perhaps driven by population growth or migration
  • an increase in the productivity of factors of production leading to higher output per worker employed
  • a rise in productive potential brought about by innovation and by the growth of entrepreneurial activity which leads to more businesses being created and surviving

Economics REVISION 1 (Micro) (65 decks)

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