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

The annual % change in RNO

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3
Q

What is long term growth

A

Shown by an increase in trend or potential GDP

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4
Q

How is short term economic growth shown

A
Cyclical changes in real GDP
Changes in AD
Changes in short run AS
Short term external shocks to D and S 
Short term policy changes
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5
Q

How is long run economic growth shown

A
Potential output / trend growth
Productivity of labour and capital 
Technological progress 
Changes in the labour force
Investment rates
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6
Q

Key factors affecting short run economic growth

A
Interest rates
Fiscal policy
Commodity prices
Exchange rates
Trading conditions
Confidence (business and consumers)
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7
Q

Key factors affecting long run economic growth

A
Capital investment
Productivity
Growth of labour 
R&D
Innovation
Enterprise and risk taking
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8
Q

What can help bring about an outward shift of a country’s PPF

A

Successful supply-side policies

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9
Q

What are the main benefits of economic growth

A

Higher living standards
Employment effects
Fiscal dividend
Accelerator effect

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10
Q

How does economic growth create higher living standards

A

Real GNI per capita helps lift people out of extreme poverty

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11
Q

How does economic growth create employment

A

Sustained growth stimulates jobs and contributes to lower unemployment rates which in turn helps to reduce inequality

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12
Q

How does economic growth create fiscal dividend

A

Higher economic growth will raise tax revenues and reduce government spending on unemployment-related welfare benefits

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13
Q

How does economic growth create the accelerator effect

A

Rising growth stimulates new investment e.g. low carbon technologies. Better growth may attract FDI

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14
Q

Is there a virtuous circle of growth

A

Higher output = increased growth = higher productivity = increased wages = rising consumer demand = higher output

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15
Q

What is balanced growth

A

Balance between:

  • industries
  • regions
  • urban/rural
  • internal/external e.g. bop
  • consumption and investment
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16
Q

What is sustainable growth

A

Meets the needs of current generations without limiting resources for current generations.

  • macro stability
  • financial stability
  • environmental sustainability
17
Q

What is inclusive growth

A
  • benefits of growth widely distributed
  • rising median per capita incomes
  • reducing poverty
  • improved opportunities for all
  • tackle discrimination and barriers
18
Q

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

A
  • trust
  • intra-regional trade
  • improving institutions and protecting property rights
  • growing a dynamic innovative private sector
  • macro policies to control inflationary pressures
  • addressing equity / fairness issues
19
Q

How can capital investment contribute to economic growth

A
  • provides an injection of demand for capital goods industries
  • bigger capital stock can lift productivity / incomes
  • economies of scale & better competitiveness lower prices
  • investment helps to sustain export-led growth adding to GDP growth
20
Q

What policies attract FDI

A
  • low corporation tax
  • subsidies
  • trade and investment agreements
  • flexible labour
  • SEZs
  • infrastructure
  • allowed to remit profits
  • low cost labour
21
Q

What do main countries rely on as a key source of extra demand and a driver of growth

A

FDI

22
Q

Social and economic costs of growth

A
  • risk of high inflation and interest rates
  • environmental effects
  • inequalities of income and wealth
23
Q

How does growth create risks of higher inflation and higher interest rates

A
  • Demand pull and cost push inflation

- The central bank may decide to raise interest rates to control inflation

24
Q

How does growth create environmental effects

A
  • pollution and waste

- unsustainable extraction of finite resources

25
Q

How does growth create inequalities of income and wealth

A
  • rapid increases in national income may lead to inequality and social divisions
  • many of the gains from growth only go to a few people
26
Q

What happens if inequality grows as a country becomes richer

A

Raises important questions about a potential trade-odd between equity and efficiency

27
Q

What can limit the rate of economy growth

A
  • primary export dependency
  • conflict / corruption
  • human capital weakness
  • inequality
28
Q

Economic growth of china

A

GDP growth 9% per year

Growth from high levels of investment and strong exports

29
Q

China in transition to a more sustainable and balanced growth rate

A

China is moving from the fast export and investment-led growth

30
Q

Economic reform challenges facing China

A
  • more reliance on domestic market and less on exports
  • raise consumption and reduce savings
  • grow private sector
  • increase innovation