Economic growth and unemployment

Question 1

Define economic growt

Answer 1

Increase in the size of a country’s economy over time

Question 2

When does economic growth occur?

Answer 2

When production across industries rises

Question 3

Define sustainable economic growth.

Answer 3

growth that meets the needs of the present without compromising the ability of future generations to meet their own needs.

Question 4

What is the trend rate of growth for the UK economy?

Answer 4

2–2.1% per year (lower since 2008 crisis).

Question 5

Difference between short-run and long-run growth?

Answer 5

Short-run: AD shifts; Long-run: LRAS shifts

Question 6

What factors increase productive capacity?

Answer 6

Land, labour, capital, entrepreneurship.

Question 7

Why is demand important for growth?

Answer 7

Without demand, production isn’t consumed

Question 8

What is the economic cycle?

Answer 8

Fluctuations of real GDP over time (boom/recession)

Question 9

What is a positive output gap?

Answer 9

Actual GDP (more than) > potential GDP

Question 10

What is a negative output gap?

Answer 10

Actual GDP (less than) < potential GDP.

Question 11

Short-run causes of growth?

Answer 11

Higher AD due to low interest rates, low taxes, gov spending, weak currency

Question 12

Long-run causes of growth?

Answer 12

Higher LRAS: improved productivity, more labour, investment, innovation

Question 13

Demand-side determinants of growth?

Answer 13

Interest rates, taxes, confidence, government spending, exchange rates

Question 14

Supply-side determinants of growth?

Answer 14

Education, training, deregulation, technology.

Question 15

Effect of immigration on growth?

Answer 15

Increases labour supply, can raise LRAS.

Question 16

Where is AD in a classical AD/AS diagram in recession.

Answer 16

AD far left of LRAS.

Question 17

Where is AD in a classical AD/AS diagram for boom

Answer 17

AD far right of LRAS

Question 18

How is a higher productive capacity shown on an LRAS graph?

Answer 18

Shift in LRAS to the right

Question 19

What does the economic cycle diagram show?

Answer 19

Boom, downturn, recession, recovery phases

Question 20

How does unemployment link to the economic cycle?

Answer 20

Rises in busts, falls in booms

Question 21

List 2 benefits of economic growth.

Answer 21

Higher disposable incomes; higher employment.

Question 22

How does growth affect government finances?

Answer 22

Increases tax revenues

Question 23

How does growth impact firms?

Answer 23

Higher profits, investment incentives

Question 24

How does growth affect living standards?

Answer 24

Higher consumption, better healthcare, education

Question 25

List 2 costs of economic growth

Answer 25

Inflation, environmental damage

Question 26

How does growth cause inflation?

Answer 26

Excess demand pulls prices up

Question 27

How does growth worsen income inequality?

Answer 27

Rich benefit more than poor

Question 28

What happens to current account during strong growth?

Answer 28

Can worsen due to higher imports

Question 29

How can growth cause environmental harm?

Answer 29

Resource depletion, pollution

Question 30

Define unemployment

Answer 30

People willing and able to work but without a job

Question 31

What is the Labour Force Survey (LFS)?

Answer 31

ONS survey measuring unemployment using ILO definition

Question 32

What is the claimant count?

Answer 32

Number claiming unemployment-related benefits

Question 33

Difference between LFS and claimant count?

Answer 33

Claimant count only measures benefit claimants.

Question 34

Define frictional unemployment.

Answer 34

Time between leaving a job and finding another

Question 35

Define structural unemployment

Answer 35

Skills mismatch between workers and jobs

Question 36

Define seasonal unemployment

Answer 36

Jobs only available during certain seasons

Question 37

Define cyclical unemployment.

Answer 37

Unemployment due to fall in AD (recession)

Question 38

Define classical (real wage) unemployment.

Answer 38

Wages above equilibrium cause excess labour supply.

Question 39

How could Brexit impact unemployment?

Answer 39

Reduced trade -> lower GDP -> higher unemployment

Question 40

How could a Eurozone recession impact UK?

Answer 40

Reduced exports, higher cyclical unemployment

Question 41

How can govs reduce cyclical unemployment?

Answer 41

Expansionary fiscal or monetary policy

Question 42

How can govs reduce structural unemployment?

Answer 42

Training and education programs

Question 43

Policy to reduce real wage unemployment?

Answer 43

Lower minimum wage, reduce union power.

Question 44

Does economic growth always raise living standards?

Answer 44

Not always; inequality and inflation can worsen

Question 45

How could rapid growth harm future growth?

Answer 45

Overheating -> inflation -> stunted future growth

Question 46

Explain hysteresis in unemployment.

Answer 46

Long-term job loss becomes permanent.

Question 47

Why might expansionary policy fail to boost growth?

Answer 47

Low confidence, liquidity trap

Question 48

Name a real-world example of short-run growth.

Answer 48

COVID recovery boom 2021.

Question 49

Name a real-world example of supply-side growth.

Answer 49

UK tech sector expansion (investment in AI).

Question 50

What is one weakness of GDP as a growth measure?

Answer 50

Ignores inequality, unpaid work, environmental costs.