Economy

Question 1

How is economic growth measured?

Answer 1

With the growth of GDP

Question 2

What is the desired range for economic growth?

Answer 2

3-4%, anything less is considered ‘slow growth’ and anything more is considered too fast and therefore ‘unsustainable’.

Question 3

Why is it important to measure our economic growth compared to other countries?

Answer 3

To be aware of changes in their economies which could have potential impact on our own economy due to impacts on trade and such.

Question 4

What are the 4 limitations of measuring economic growth?

Answer 4

-GDP doesn’t include non-market production
-GDP doesn’t provide information about the distribution of production
-GDP doesn’t consider the impact of production on the environment.
-GDP involves some ‘guesstimates’ of production.

Question 5

Explain why GDP doesn’t include non-market production.

Answer 5

If someone does jobs around home that can be done by a paid worker they are contributing to economic growth, but this contribution is not included because it can’t be measured.

Question 6

Explain why GDP doesn’t provide information about the distribution of production

Answer 6

GDP only measure the changes in the quantity of goods/services produced, but there is no input of who receives the increased goods/services. [The increased production may not be shared equally among the citizens of the economy]

Question 7

Explain why GDP doesn’t consider the impact of production on the environment

Answer 7

Increased production of goods/services can mean increased pollution and other environmentally harmful things, these negative outcomes of production will negatively affect our national wealth later down the track.

Question 8

Explain why GDP involves some ‘guesstimates’ of production

Answer 8

The value of some non-marketed productions [such as defense or education services provided by the government] making up GDP has to be ‘guesstimated’ which leads to inaccuracies.

Question 9

How might a rising growth rate affect living standards in a country?

Answer 9

A rising growth rate means that the economy is keeping up with demand, and people should have access to goods and services that improve their living standards.

Question 10

How might an economic growth rate that is too high [4%<] be negative?

Answer 10

If the growth rate is too high then it may not be sustainable over a long period. Which in turn may lead to a time of economic decline.