Economic Growth and Cycle Flashcards
What is long run economic growth? Examples?
=shown by an outward movement of the economy’s production possibility frontier, increasing potential output
•expansion of supply of factor inputs
•improvements in technology
•increased factor productivity
QQFOP (quality+quantity of factors of production)
Economic growth in the UK/China/US? GDP
U.K.= 0.5% China= 6.7% US= 2%
Short term economic growth?
Examples?
=an increase in the output that results from making use of spare capacity and unemployed labour (economic recovery)
•AD^ C+I+G+(X-M)
What are some advantages of economic growth?
- Rise in standard of living+potential to eliminate poverty
- raises tax revenue without raising tax rates
- provision of public and merit goods
What are some disadvantages of economic growth?
- gap between rich and poor increase=higher relative poverty
- negative externalities e.g pollution
- depletion (reduction in number) of raw materials
- general expectation of wanting more
Some ways of measuring the standard of living?
- increased well being of the population
- increased economic welfare of population
- increase in per capita rate of consumption of goods/services
Ways to measure the size of an economy?
NI (National Income)= the monetary value of the flow of output of goods and services produced in an economy over a period of time
- GDP (Gross Domestic Product)= output produced by resources in the UK
- GNP (Gross National Product)= output produced by resources within UK+net property income from abroad (renting holiday homes)
Explain the economic cycle
•trend rate slopes upwards
•actual growth fluctuates=
Boom, downturn, (trend rate line), recession, slump, ^recovery (trend rate line), boom
What is the definition of a recession?
A recovery?
=2 consecutive quarters of negative economic growth
=2 consecutive quarters of positive economic growth
What happens in a boom?
- positive output gap
- inflation pressures= rises
- economic growth rises
- balance of payments deficit rises
What happens in a slump?
- negative output gap
- growth falls
- inflation falls
- balance of payment deficit rises
What is the def of standard of living?
The degree of wealth and material comfort available to a person or community
Measures of standard of living?
- HDI (human development index)= life expectancy at birth+mean and expected years of schooling+GNI per capita
- ISEW (index of sustainable economic welfare)= environmental costs e.g pollution, commuting costs, noise, urbanisation
- Misery Index= employment rate+inflation rate
Highest standard of living?
Lowest?
Highest= Norway (Switzerland+Australia) Lowest= Burundi, Chad, Central African Republic
Norway= $25 minimum wage
Political cycles as an explanation for the econ cycle?
MPs engineer a boom in economic cycle to gain votes
