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A-Level Economics Year 1 > Economic Growth- TB > Flashcards

Economic Growth- TB Flashcards

1
Q

What is long-run economic growth?

A

The expansion of the productive capacity of an economy

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2
Q

What is short-run economic growth?

A

An increase in actual GDP

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3
Q

What is a nominal value?

A

Value of an economic variable based on current prices, taking no account of changing prices throughout time

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4
Q

What is a real value?

A

Value of an economic variable, taking account of changing prices through time

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5
Q

What is real GDP?

A

GDP at constant prices, taking account of changing prices through time

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6
Q

What is nominal GDP?

A

GDP at current prices, taking no account of changing prices through time

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7
Q

What 4 things do you increase the potential output of to achieve long-run economic growth?

A

Improved quantity or quality of:
1) Land
2) labour
3) Capital
4) Enterprise
(FOP)

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8
Q

How can short-run economic growth be achieved?

A

Using more:
1) Land
2) Labour
3) Capital
4) Enterprise
(FOP)

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9
Q

What is the best ‘quantity’ improvement?

A

Roads- benefits everyone & increases amount of businesses that can use them

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10
Q

What is the best ‘quality’ improvement?

A

Specialisation- improves each workers skill at carrying out their work as they can improve

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11
Q

How do you show 1) short-run & 2) long-run economic growth on a PPC curve?

A

1) Point moving further towards PPC
2) PPC shifting right

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12
Q

What is gross national income (GNI)?

A

GDP plus income from abroad

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13
Q

What is seasonal adjustment?

A

When seasonal fluctuations in a variable are smoothed to reveal the underlying trend

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14
Q

What is GDP per capita?

A

Average level of GDP per head of population

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15
Q

What is labour productivity?

A

Measure of output per worker or output per hour worked

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16
Q

What is capital productivity?

A

measure of output per unit of capital

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17
Q

What is total factor productivity?

A

Average productivity of all factors measured as the total output divided by the total amount of inputs used

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18
Q

What is human capital?

A

Stock of skills & expertise that contribute to a worker’s productivity, increased through education & training

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19
Q

What is the economic cycle?

A

A phenomenon whereby GDP fluctuates around an underlying trend, following a regular pattern

20
Q

What is a recession?

A

When an economy’s real GDP falls for 2 consecutive quarters (quarter of a year)

21
Q

What is indexing?

A

Taking a base year to allow easy comparisons to that year

22
Q

What is the equation for a price index?

A

Nominal GDP ÷ real GDP x 100

23
Q

How do you work out % change?

A

100 (New value ÷ old value) -100

24
Q

How do you work out GDP per capita?

A

GDP ÷ population

25
Q

When is SR economic growth possible?

A

If economy is below full employment

26
Q

How is short run economic growth shown on a PPC diagram?

A

A movement to the PPC from a position within the curve

27
Q

What 2 things can short run economic growth be caused by?

A

1) Increase in AD
2) Increase in short run AS

28
Q

What does 1) economic growth & 2) recession reflect?

A

1) Rising output
2) Falling output

29
Q

What are 2 benefits of economic growth?

A

1) Improves living standards if GDP is greater than population
2) Higher RDI- improve environment, more luxuries etc

30
Q

What is a disadvantage of recession?

A

A longer and deeper recession leads to more unemployment & reducing living standards to a larger extent

31
Q

Why is economic growth important?

A

It’s the main way of measuring how living standards of a country’s population is changing

32
Q

What is inflation?

A

The rate of change of the average price level

33
Q

What is an index number?

A

A way of comparing the value of a variable with a base observation

34
Q

What is consumer price index (CPI)?

A

A measure of the general level of prices in the UK, as a measure of the government’s inflation target

35
Q

What is retail price index (RTI)?

A

A measure of the average level of prices in the UK

36
Q

What is deflation?

A

A fall in average price levels (negative inflation)

37
Q

What is disinflation?

A

A fall in the rate of inflation (less inflation than previouslt)

38
Q

What is hyper inflation?

A

When inflation reaches extreme or excessive rates

39
Q

What are 2 measures of the price level?

A

1) Consumer price index (CPI)
2) Retail price index (RPI)

40
Q

What is cost-push inflation?

A

Inflation being caused by an increase in the costs faced by firms arising on the supply side of an economy

41
Q

What is demand-pull inflation?

A

Inflation caused by an increase in AD

42
Q

What is money stock?

A

The quantity of money in the economy

43
Q

What are 6 consequences of persistently high inflation?

A

1) Increased inequality
2) Falling real incomes
3) Resource allocation difficulties
4) Risks of wage inflation
5) Uncertainty (less I)
6) Menu & shoe-leather costs

44
Q

What are 2 advantages of high inflation?

A

1) Reduced real value of debt
2) Facilitates economic growth

45
Q

What are 3 disadvantages of high inflation?

A

1) Fiscal drag- gvnmt doesn’t increase tax brackets with inflation, increasing tax on income worth less
2) Increased costs
3) Uncertainty

46
Q

What does the level of inflation wanted depend on?

A

What the economic objectives are, if objective is to decrease national debt, high inflation is desirable, if objective is growth, low & stable inflation is desirable

A-Level Economics Year 1 (10 decks)

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