Economic performance (Macro) Flashcards
Economic growth (output gaps), issues with growth.
What determines long run economic growth?
Increased labour force size
Improved productivity
Capital investment
New technology
Education
Difference between SRAS and LRAS?
Short run means there is an increase in GDP, whilst long run is when there is an increase in the potential capacity of supply.
Benefits of economic growth?
-Better living standards
-Easy to find employment
-Increased tax revenue
-lower welfare spending
-less poverty
Drawbacks of economic growth?
Negative externalities, greater inequality, higher inflation, exploitation of natural resources.
What is a boom?
when short run growth > trend growth, leads to positive output gaps.
What is a downturn?
when short run growth is falling but > trend growth
What is a recession?
When short run growth < trend rate of growth, leads negative output gap
What is a recovery?
When short run growth is increasing post recession but still a negative output gap.
What will magnify fluctuations?
Multiplier/accelorator or excessive credit growth.
Keynes on growth?
Animal spirits postulation, peoples collective expectations determine AD
Which behavioural theory does herding relate to?
Social norms
