Economic Growth flashcards

Question 1

What are the 5 roles of the government?

Answer 1

To redistribute income
To reduce unemployment
To control inflation
To protect environment
To maintain economic growth

Question 2

Define Economic Growth

Answer 2

The increase in the level of output by a nation

Question 3

Define GDP

Answer 3

The total value of all goods & services produced and sold in a year

Question 4

How to measure economic growth

Answer 4

%change in GDP = year 2 - year1/year 1 x 100

Question 5

What are some limitations of economic growth

Answer 5

• Inflation as if prices rise, it can appear as if GDP has risen too
• Statistical errors
• The hidden economy, GDP doesn’t take into account the unrecorded economic activities hence, undervaluing the real GDP
• Population Changes
• Living conditions of people
• External costs

Question 6

Define boom

Answer 6

The peak of an economic cycle where GDP is growing fast due to economy performing well

Question 7

define downturn

Answer 7

GDP grows but slowly and is usually followed by a boom

Question 8

Define Recession

Answer 8

GDP is negative and it is at the bottom of the economic cycle.

Question 9

Define recovery

Answer 9

GDP begins rising again and there’s an uprising in the economy where businesses begin to regain confidence too.

Question 10

What are Impacts of a boom

Answer 10

Living standards increase due to better products being provided to the economy and also due to more discretionary expenditure

Question 11

What are impacts of a recession?

Answer 11

living standards decrease due to fewer incomes and fewer products being produced as well as quality may suffer too due to firms not being as productive and not having enough revenue. Demand for normal goods decreases too

Question 12

Impacts of a downturn

Answer 12

Unemployment starts rising, wage increases will slow down, firms stop expanding, profits may fall and prices rise slowly

Question 13

Impacts of a recovery

Answer 13

Businesses regain confidence and economic activity increases, demand rises and unemployment begins to fall, prices rise again

Question 14

Negative impacts of economic growth

Answer 14

• Increased pollution and damage to environment
• Newer health challenges due to increase in population
• Increase in income inequality
• Increase in demand for natural resources due to scarce resources being used up faster
• Machines may replace humans, increases unemployment

Question 15

Positive effects of economic growth

Answer 15

• Improved living standards as people can afford better quality goods
• Increased employment opportunities and incomes
• Increased sales, profits and business opportunities
• Low price inflation
• Increasing tax revenues for government to improve public services

Question 16

Economic growth impacts on employment?

Answer 16

An increase in economic growth means that businesses generate more and demand for labour increases too hence, they need more workers which decreases unemployment

Question 17

Economic growth impacts on standards of living?

Answer 17

An increase in economic growth means average people have a higher disposable income meaning they are able to buy more and better quality goods & services

Question 18

Economic growth impacts on poverty?

Answer 18

An increase in economic growth means poverty gets reduced due to the expansion of existing businesses and development of new businesses creating more jobs that can be taken up by the poor

Question 19

Economic growth impacts on productive potential?

Answer 19

An increase in economic growth means productive potential of a country increases and a country can produce more goods & services.

Question 20

Economic growth impacts on Inflation?

Answer 20

An increase in economic growth too fast can laed to econonmy overheating meaning there may be a house price boom due to demand for shelter increasing but due to the boom, prices increase dramatically and many may not be able to buy a house

Question 21

Economic growth impacts on environment?

Answer 21

An increase in economic growth means that more cars will be purchased and more flights would be taken leading to more greenhouse gases being produced and non-renewable resources being used up (gas and oil) hence, they can’t be replaced and future generations will have less of it causing unsustainable growth