economic growth: wealth creation process and patterns of distribution Flashcards
what is the definition of wealth?
all the accumulated physical and financial assets which enable people and businesses to earn an income
physical wealth
tangible/real assets
financial wealth
intangible or monetary assets
what are the three groups that own wealth
households
businesses
state
income
remuneration earned by the factors of production for participating in economic activities
income can take the form of :
wages
interest
profit
rent
wealth
stock of both real and monetary assets that have been accumulated over time
4 sources of wealth
savings
luck
inheritance
income
savings equation
savings(s) = Income(Y) - Consumption expenditure(C)
3 reasons for unequal distribution of income
Unequal ownership of wealth
difference in skills and qualifications
discrimination
3 significant reasons for wealth distribution (inequalities)
inequalities of income
inheritance
the market system
what does the market system do to distribute wealth?
rewards successful people
Two methods to measure the extent of income inequality
lorenz curve
gini coefficient
what does gini coefficient measure
the exact degree of inequality
The greater the distance between lines of equal distribution and the lorenz curve means…
the greater the degree of inequality
5 methods of economic growth
-Increase in productivity
-availability and utilisation of production factors
- technological change
- effective government policies and admin
- investment
productivity
the relationship between real output and one unit of factor input
5 ways in which productivity increases are signalled
- Output increases while input remains the same
- Output increases while input declines
- Output increases faster than input
- Output remains constant while input declines
- Output declines at a slower rate than input
In terms of the labour force, when does economic growth occur
when the ratio of the working population to the total population increases
technology
any instrument or technique, or method used that extends human ability
what does efficient admin mean
that the policies are executed in a manner that minimises time wastage, inconvenience and costs
nepotism
favouring family and friends
corruption
using public office for personal gain
what does a country’s production depend on
capital stock
