Economic Growth

Question 1

define economic growth

Answer 1

the increasing capacity of the economy to satisfy need and wants of the population

Question 2

define sustainable econ growth

Answer 2

growth rate that cna be maintained without creating future economic issues and has to be faster than population growth

Question 3

how does price make GDP not a good measure of growth with example

Answer 3

GDP only includes g/s exchanged for pay and exlcudes non market items that boost welfare eg charity work, voluntary, diy

Question 4

how does utility make GDP not a good measure of growth with example

Answer 4

GDP only measures ouput value not it’s ability to satisfy needs/wants like a car today vs 2008 is more fuel efficient

Question 5

how does productivity make GDP not a good measure of growth with example

Answer 5

doesnt know inputs used to produced good/service

eg FIFO workers, ppl burnt out working

Question 6

what is the human development index and what are their 3 key indicators of economic growth

Answer 6

summary of average achievement in what the UN believs are key for growth

1. knowledge (years of schooling)
2. S. O .L (GNP)
3. Healthy life (life expectancy)

Question 7

how do you calculate annual growth rate

Answer 7

GDP % period 2 - period 1
—————————————— x 100
period 1

Question 8

what are the 3 determinants of economic growth

Answer 8

stock of natural, human and capital resources

Question 9

why are natural resources vital for growth

Answer 9

they are the foundation of econ growth allowing production with the help of enterprise and management (fracking irrigation)

Question 10

(natural) explain how labour (natural and migration) effects demand and labour supply hence growth

Answer 10

natural increase: creates immediate demand but not immediate and labour supply
Migration: creates demand and supply

Question 11

what is human capital and how is it developed

Answer 11

stock of knowledge developed through education and experience developed through social infrastructure, education, uni

Question 12

how do capital resources effect growth and what are the 2 types

Answer 12

increases the quantity of capital equipment will also impact growth.

1. public investment - provides social infrastructure and provides stock for priv sector
2. private investment - buildings, machinery, equipment

Question 13

what are the 2 causes of capital accumulation

Answer 13

capital deepening

capital widening

Question 14

what is capital widending

Answer 14

when capital stock grows in proportion to other productive inputs (investment increase)

Question 15

what is capital deepening

Answer 15

increases in capital stock relative to other productive resources ( more capital intesnive)

Question 16

what are the 5 benefits of growth

Answer 16

1. increasing income + material welfare (higher purchasing power)
2. more economic opportunities (more productive - more resources hired)
3. tax dividends to gov (allows more spending on social infrastructure)
4. higher quality g/s (promotes, skills, productivity and tech change)

Question 17

what are the 5 costs of growth

Answer 17

1. not evenly spread
2. structural change in the economy
3. inflationary pressures
4. social costs
5. goods and bads

Question 18

using a graph (fig 8.7) describe why benefits rise at a decreasing rate and costs at an increasing rate - what is the intersection

Answer 18

benefits - living standard rise

costs - op costs of resource rise