Economic performance Flashcards
What is the difference between short-run and long-run economic growth?
Short-run growth is an increase in real GDP resulting from higher demand or better use of existing resources, while long-run growth is an increase in the economy’s productive capacity, often due to improvements in technology, labour, and capital.
What are the main demand-side and supply-side determinants of short-run economic growth?
Demand-side determinants include increases in consumer spending, investment, government expenditure, and net exports. Supply-side determinants include improvements in productivity, workforce skills, and technological advancements, which help increase output without raising prices
What are some costs and benefits of economic growth?
Benefits include higher employment, increased incomes, and improved standards of living. Costs may involve environmental damage, resource depletion, income inequality, and potential inflationary pressures.
How can economic growth impact individuals, the economy, and the environment?
Growth can increase job opportunities and living standards for individuals, boost overall economic output, and improve tax revenues. However, it may harm the environment through pollution and resource depletion if not managed sustainably.
What is the economic cycle, and what indicators are used to identify its phases?
The economic cycle refers to the fluctuations in economic activity over time, including expansion, peak, contraction, and trough phases. Key indicators include real GDP, inflation rate, unemployment, and investment levels to track these phases.
What is the difference between positive and negative output gaps?
A positive output gap occurs when actual GDP exceeds potential GDP, often leading to inflation. A negative output gap happens when actual GDP is below potential GDP, usually associated with unemployment and unused capacity.
What causes changes in the phases of the economic cycle?
Phases change due to demand-side shocks (like changes in consumer confidence or global demand) and supply-side shocks (such as shifts in productivity or input costs). Both domestic and global factors, like financial crises or technological changes, influence these phases.
