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Economics Unit 4 > Economic growth and the economic cycle > Flashcards

Economic growth and the economic cycle Flashcards

1
Q

recession d

A

two consecutive quarters of negative economic growth

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2
Q

economic growth d

A

an increase in the real output of the economy

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3
Q

long-term growth rate d

A

the average rate of economic growth sustained over a period of time

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4
Q

GDP per capita d

A

the total output of the economy in a year, divided by the size of the population, adjusted for inflation

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5
Q

production possibility frontier (PPF) d

A

a diagram of a simplified economy showing the maximum combination of products that can be produced given maximum productive efficiency

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6
Q

actual growth d

A

an increase in the productive potential of the economy matched by an increase in demand

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7
Q

potential growth d

A

increase in the productive potential of the economy, not necessarily matched by demand

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8
Q

output gap d

A

difference between the actual level of GDP and the productive potential of the economy

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9
Q

trend rate of economic growth d

A

the long-run average increase in GDP

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10
Q

economic cycle d

A

the cyclical pattern of short-term fluctuations in GDP from year to year

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11
Q

supply side policies d

A

a range of measures designed to increase aggregate supply

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12
Q

what does long-term economic growth require

A

shift of aggregate supply

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13
Q

how is long-term economic growth generated

A

an increase in the quantity and/or quality of the factors of production

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14
Q

what is likely to be a problem for countries with rapidly growing populations

A

increasing population increases GDP but not GDP per capita so suffer falling living standards

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15
Q

activity rate / participation rate d

A

the proportion of the population of working age in a job or actively seeking work

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16
Q

occupational immobility d

A

the difficulties faced by workers wishing to change occupations due to not having the required skills or qualifications

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17
Q

labour productivity d

A

output per worker per hour

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18
Q

what are the advantages of economic growth

A

rise in standard of living
increased tax revenue for merit goods
reduce poverty
reduce negative environmental spillover effects

19
Q

what are some disadvantages to economic growth

A

negative externalities

inequality

20
Q

gross domestic product d

A

output produced by resources in the UK

21
Q

gross national product d

A

output produced by resources within the UK, plus net property income from abroad

22
Q

national income d

A

output produced by resources within the UK, plus net property income from abroad, minus depreciation of the nation’s capital equipment

23
Q

problems with GDP as a measure

A

doesn’t take into account quality, distribution of income, ignores amount and value of leisure, no account of what is produced

24
Q

why is GDP bad because it doesn’t take account of what’s being produced

A

USA spends on defense and prisons which may not contribute to happiness

25
Q

purchasing power parity d

A

exchange rates that take into account how much a typical basket of goods in one country costs compared to another country

26
Q

problem with using national income to compare countries

A

importance of non-monetised activity

assumes correct exchange rates from local currency into dollars

27
Q

human development index (HDI) d

A

a measure of economic welfare based on the average of three indicators :
standard of living
life expectancy
educational attainment

28
Q

what is the maximum value for HDI

A

1, closer you are, the better

29
Q

human poverty index d

A 
a measure of economic welfare based on 4 basic dimensions of human life :
longevity
knowledge
economic provisioning
social inclusion
30
Q

misery index d

A

a measure of economic welfare constructed by adding the unemployment rate to the inflation rate

31
Q

sustainability (of economic growth)

A

economic growth which does not impose costs on future generations

32
Q

what are the 3 main threats to sustainability

A

exhaustion of resources
environmental damage
global warming

33
Q

what are the economic costs of global warming

A

rising sea levels leading to loss of agricultural land
increasing storm damage
structural adjustment problems for countries heavily involved in agriculture

34
Q

balance of payments d

A

a record of the financial transactions over a period of time between a country and its trading partners

35
Q

what happens during a recovery

A

economic activity increases

optimism about future and consumer spending and investment increase

36
Q

what happens during a boom

A

unemployment low, economic growth high but eventually it is not possible for output to meet increasing levels of aggregate demand

37
Q

what happens during a downturn

A

high inflation leads to reduced international price competitiveness,
firms make output cut backs or go out of business,
fall in economic growth and rising unemployment reduce confidence

38
Q

what happens during a recession

A

aggregate demand falls
unemployment accelerates
eventually households and firms have to increase spending to replace capital equipment / TVs / cars
Government spending will inadvertently rise

39
Q

demand-pull inflation d

A

inflation resulting from too much demand in the economy, relative to supply capacity

40
Q

accelerator theory d

A

the theory that the level of investment is related to past changes in national income

41
Q

what are some explanations of the economic cycle

A

political cycles
outside ‘shocks’
multiplier / accelerator model
speculative ‘bubbles’

42
Q

multiplier effect d

A

a change in one of the components of aggregate demand leads to a greater overall change in national income

43
Q

multiplier / accelerator model

A

a model which describes how the interaction of the accelerator theory and multiplier effect lead to changes in national income

Economics Unit 4 (9 decks)

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