Economic policy objectives Flashcards
What is economic growth
an increase in real GDP in an economy causes by and increase in AD or LRAS
what are three causes of EG
Weaker EXR
Increase govt spending
Lower income or corporate tax
what does short run growth show
an increase in AD
(using spare capacity)
how can SR economic growth be shown on a diagram
an shift right of AD on a LRAS curve
What causes LR Growth
An increase of LRAS
what does LRAS mean
the productive capacity of the economy
How can LR growth be show on a diagram
A shift right of LRAS
OR
an outward shift on the PPF
what factors increase LRAS
Quantity of FofP
Quality of FofP
increase in productive efficiency
What are three measures of Economic Growth
GDP
GDP PER CAPITA
GNI
what does GDP show
output
expenditure
come
What is GNI
income of domestic workers - income of foreign workers
What is a disadvantage of GDP
doesn’t account for informal activities such as on the black market
or DIY work
does have market value but is not registered
what is a disadvantage of GDP PER CAPITA
remittances
what are some benefits of economic growth
higher disposable income
higher employment
what are some costs of EG
Inflation
environmental cost
what does economic growth depend upon
is growth sustainable and balanced
