Economic Performance Flashcards
(61 cards)
short run growth
using existing resources more efficiently
what is long run growth
when there is sustained improvement in quantity or quality of the FOP leading to increase in production over a period of time
factors of long run growth
technological advancements
investment in human capital
capital accumulation, instutional and policy factors, pop. growth and R&D
how can demand side growth be shown
the PPF curve
how to illustrate long run economic growth
the LRAS shifting right ( A change to the quantity/quality of the factors of production has increased potential output of the economy from YFE→YFE1)
and PPF curve shifting outwards ( caused by an increase in the quality or quantity of the available factors of production eg quality can be improved through training labour force leading to more productivity)
Benefits of economic growth
Increased employment
Higher GDP= Increase standard of living
facilitate investment on infrastructure
more competitive= better quality, innovation more consumer choice
costs of economic growth
negative externalities
depletion of natural resources
unequal distribution of wealth
not evenly distributed
impact of economic growth(EG) on indvdls
EG can lead to higher income levels for individuals. with businesses expanding and creating or jobs opportunities ppl will gain rising wages but it may not be evenly distributed if ur alr a higher income indvdl with assets might gain significant compared to poor growth leading to big difference between poor and rich
impact on economic growth on the economy
higher employment rates, improved standards of living , increased investment in education
However, can lead to inflation making exports more expensive reducing competition in global markets
impact of economic growth on the environment
negative externalities: increased air pollution and plastic waste
depletion of resources harms ecosystems and bio diversity
more waste levels and poor management could lead to env. damage
what is the economic cycle
refers to the changes in real GDP that occur in an economy over time.
represents the actual growth and fluctuations in economic activity.
four points in the cycle
boom recession slowdown recovery
diagram of economic cycle
one squiggly line repreents real gdp and one straight line called potential gdp
what is a positive output gap
growth of real GDP that is above the trend
what is a negative output gap
growth of GDP that is below the trend
chararcteristics of a boom
high rates of economic growth
reduction of negative output gap
reducing unemployment
higher confidence
improved gov budget
characteristics of a recession
two or more consecutive negative economic growth
high unemployment
increasing negative output gap
spare production capacity
low inflation
low confidence
an indication of a positive output gap
rapidly increasing prices
an indicator of negative gap increasing
rising unemployment and a slowdown on economic growth
diagram of negative output gap
when it produces below the equilibrium
positive output gap
when the economy is operating beyond its full potential
cause because workers are willing to work overtime to reach full capacity however not sustainable and will return to full employemnt but at a higher price
Factors that Change the Phase of the Economic Cycle
economic shocks
herd behaviour when ppl copy other because they believe tha a collective one is more accurate/rational
excessive growth in credit and lvls in debt
asset price bubbles
definition of unemployment
of working age not working but actively seeking work
what is economically inactive
of working age but not working and not seeking work
