Economic Growth

Question 1

Real GDP=

Answer 1

Real GDP₂ - Real GDP₁ /Real GDP₁

Question 2

2 labour sources of Aggregate output

Answer 2

1. Labour productivity
2. Aggregate hours

Question 3

3 causes of Aggregate hours change are…

Answer 3

1. Population age
2. Employment rate
3. Average hours worked

Question 4

Labour productivity=

Answer 4

Real GDP/Aggregate labour hours

Question 5

Growth of Labour productivity depends on… (3)

Answer 5

Growth of human capital

Growth of physical capital

Growth of technolgy

Question 6

3 Policies to increase Aggregate hours

Answer 6

Increase labour supply

Increase labour demand

Reduce market frictions

Question 7

3 ways to increase labour supply

Answer 7

1. Increased incentives to work (tax)
2. Retraining
3. Increasing mobility of work

Question 8

2 ways to increase labour demand

Answer 8

1. Encourage new firms
2. Reduce non-labour costs

Question 9

2 ways to remove market frictions

Answer 9

1. Weaken trade unions
2. Removal of minimum wage

Question 10

3 policies to improve labour productivity

Answer 10

1. Infastructural investment
2. Encourage private sector investment
3. Fund R+D