Economic growth pt2

Question 1

Rate of economic growth

Answer 1

The speed at which national output grows over a period of time

Question 2

Formula of rate of economic growth

Answer 2

Change in GDP(new-old)(billions)/Original GDP(billions)

Question 3

Trend rate of economic growth

Answer 3

The expected increase in potential output over time.

Question 4

Actual growth

Answer 4

An increase in the output of the economy, matched by demand

Question 5

Potential growth

Answer 5

An increase in the productive potential of an economy not necessarily matched by demand.

Question 6

Short run growth

Answer 6

We can think of this as actual growth as it is unemployed resources or slack in the economy being used more efficiently. Actual growth usually fluctuates.

Question 7

Short run growth-PPF perspective

Answer 7

Movement from inside the PPF on to the PPF curve would mean that normal capacity has been reached and it is producing at production potential

Question 8

Short run growth-Causes

Answer 8

1) Increase in AD (C,I,G,Nx) - e.g. Increased spending, decreases taxation
2) Increase in AS (factors that decrease the COP hence increasing SRAS/shifts it right) - e.g. decrease in commodity prices, world oil prices, wage rates

Question 9

Long run growth

Answer 9

Can think of this as a potential growth. Occurs when there is increased capacity which is shown by an increase in the trend rate of growth

Question 10

Long run growth- PPF perspective

Answer 10

The whole PPF shifts out

Question 11

Long run growth- Causes

Answer 11

Caused by an increase in AS (LRAS) e.g. Increases in productivity, education and technology