Economic Growth Flashcards
What is economic growth
A long term expansion of productive potential
What is short term growth
The annual % change in RNO
What is long term growth
Shown by an increase in trend or potential GDP
How is short term economic growth shown
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
How is long run economic growth shown
Potential output / trend growth Productivity of labour and capital Technological progress Changes in the labour force Investment rates
Key factors affecting short run economic growth
Interest rates Fiscal policy Commodity prices Exchange rates Trading conditions Confidence (business and consumers)
Key factors affecting long run economic growth
Capital investment Productivity Growth of labour R&D Innovation Enterprise and risk taking
What can help bring about an outward shift of a country’s PPF
Successful supply-side policies
What are the main benefits of economic growth
Higher living standards
Employment effects
Fiscal dividend
Accelerator effect
How does economic growth create higher living standards
Real GNI per capita helps lift people out of extreme poverty
How does economic growth create employment
Sustained growth stimulates jobs and contributes to lower unemployment rates which in turn helps to reduce inequality
How does economic growth create fiscal dividend
Higher economic growth will raise tax revenues and reduce government spending on unemployment-related welfare benefits
How does economic growth create the accelerator effect
Rising growth stimulates new investment e.g. low carbon technologies. Better growth may attract FDI
Is there a virtuous circle of growth
Higher output = increased growth = higher productivity = increased wages = rising consumer demand = higher output
What is balanced growth
Balance between:
- industries
- regions
- urban/rural
- internal/external e.g. bop
- consumption and investment