Economic Growth

Question 1

what are the 3 macroeconomic objectives

Answer 1

1. sustainable economic growth 2. price stability 3. employment

Question 2

what is economic growth

Answer 2

the increasing capacity of an economy to satisfy the needs/wants of the population

Question 3

what does increased economic growth mean for the future

Answer 3

allows households to achieve higher standards of living quicker and expands the nation’s opportuntity set for the future

Question 4

what is ‘sustainable’ economic growth

Answer 4

rate of growth which can be maintained without creating other economic issues for future

Question 5

what are the 2 types of GDP as measure of econ growth

Answer 5

nominal - the value of output expressed in current prices

real - removes the effect of price change (inflation)

Question 6

how does population growth affect economic growth and how can it be accounted for

Answer 6

for individuals to be better off in material terms, econ growth has to be faster than population growth
real GDP per capita accounts for population growth

Question 7

explain how price makes GDP not a good measure of growth using examples

Answer 7

GDP only includes value of G/S exchanged for payments. 
some activities (non market items) add to material welfare for society but are excluded from GDP
e.g.  charity /voluntary/DIY work

Question 8

explain how utility (ability of things to satisfy wants) makes GDP not a good measure of growth using examples

Answer 8

GDP measures value of output not it’s ability to satisfy wants
for example current electronics deliver much better performace than 2008 model
cars are safer and more fuel efficient

Question 9

explain how productivity makes GDP (output per unit of input) not a good measure of growth using examples

Answer 9

GDP does not know the inputs used to produce outputs

some people work 2 jobs, FIFO, many people are really burnt out but the economy still grows

Question 10

explain the happy planet index as another measure of economic growth

Answer 10

the happy planet index takes wellbeing, life expectancy, ecological footprint (how much land needed to sustain consumption, inequality of outcomes (how unequal life expectancy/wellbeing is distributed)

Question 11

Explain the human development index and what it takes into account

Answer 11

a summary of average achievement in what the UN believe are key dimesnions of human development:
a healthy life
being knowledgable (schooling years)
decent standard of living (GNP per year)