Edev Mid 4 Flashcards
increase in the production of economic goods and services, compared from one period of time to another
Economic growth
It can be measured in nominal or real (adjusted for inflation) terms. Traditionally, aggregate economic growth is measured in terms of gross national product (GNP) or gross domestic product (GDP), although alternative metrics are sometimes used.
Economic growth
refers to an increase in aggregate production in an economy. Often, but not necessarily, aggregate gains in production correlate with increased average marginal productivity. That leads to an increase in incomes, inspiring consumers to open up their wallets and buy more, which means a higher material quality of life or standard of living.
Economic growth
refers to an increase in aggregate production in an economy. Often, but not necessarily, aggregate gains in production correlate with increased average marginal productivity. That leads to an increase in incomes, inspiring consumers to open up their wallets and buy more, which means a higher material quality of life or standard of living.
Growth
economic output
depends on factors, such as capital goods, labor force, technological advancements, and human capital.
latter deals with the efficacy of measures used to balance an economy’s social, economic, and political framework.
economic development
higher income, reduced poverty, better facilities, and improved quality of life.
economic expansion
increases state capacity and the supply of public goods. Growth creates wealth, some of which goes directly into the pockets of employers and workers, improving their wellbeing. As people earn higher incomes and spend more money, this enables people to exit poverty and gain improved living standards.
Economic growth
from increased consumption and financial activity
Determinants of Economic Growth
Determinants of Economic Growth
- Physical Capital Goods
- Technological Improvement
- Labor Force
- Human Capital
Increasing the amount of physical capital, such as machinery, equipment, factories, etc., in an economy raises labor productivity.
- Physical Capital Goods
The increased adoption of sophisticated technology leads to efficient and cost-effective production. Furthermore, businesses can produce greater output with the same amount of physical capital.
- Technological Improvement
When all other factors remain constant, more workers participate in the productivity of economic goods and services.
- Labor Force
Providing skilled laborers with training or hiring experienced workers boosts their productivity.
- Human Capital
refers to economy-wide fluctuations in production, trade, and general economic activity.
business cycle
From a conceptual perspective, the ____________ is the upward and downward movements of levels of GDP (gross domestic product) and refers to the period of expansions and contractions in the level of economic activities (business fluctuations) around a long-term growth trend.
business cycle
STAGES OF THE BUSINESS CYCLE
EXPANSION
PEAK
RECESSION
DEPRESSION
TROUGH
RECOVERY
In this stage, there is an increase in positive economic indicators such as employment, income, output, wages, profits, demand, and supply of goods and services.
EXPANSION
Debtors are generally paying their debts on time, the velocity of the money supply is high, and investment is high. This process continues as long as economic conditions are favorable for expansion.
EXPANSION
The maximum limit of growth is attained. The economic indicators do not grow further and are at their highest. Prices are at their peak. This stage marks the reversal point in the trend of economic growth. Consumers tend to restructure their budgets at this point.
PEAK
stage that follows the peak phase. The demand for goods and services starts declining rapidly and steadily in this phase. Producers do not notice the decrease in demand instantly and go on producing, which creates a situation of excess supply in the market. Prices tend to fall. All positive economic indicators such as income, output, wages, etc., consequently start to fall.
RECESSION
There is a commensurate rise in unemployment. The growth in the economy continues to decline, and as this falls below the steady growth line, the stage is called a depression.
DEPRESSION
there is a turnaround in the economy, and it begins to recover from the negative growth rate. Demand starts to pick up due to low prices and, consequently, supply begins to increase.
RECOVERY
It is the negative saturation point for an economy. There is extensive depletion of national income and expenditure.
TROUGH
The population develops a positive attitude towards investment and employment and production starts increasing. Employment begins to rise and, due to accumulated cash balances with the bankers, lending also shows positive signals. In this phase, depreciated capital is replaced, leading to new investments in the production process.
RECOVERY
UNEMPLOYMENT
UNEMPLOYMENT
referring to individuals who are employable and actively seeking a job but are unable to find a job. Included in this group are those people in the workforce who are working but do not have an appropriate job.
UNEMPLOYMENT
unable to find a job. Included in this group are those people in the workforce who are working but do not have an appropriate job.
UNEMPLOYMENT
the biggest cause of unemployment that typically happens during a recession. When companies experience a reduction in the demand for their products or services, they respond by cutting back on their production, making it necessary to reduce their workforce within the organization. In effect, workers are laid off.
- Demand deficient unemployment
TYPES OF UNEMPLOYMENT
- Demand deficient unemployment
- Frictional unemployment
- Structural unemployment
- Voluntary unemployment
workers who are in between jobs. An example is a worker who recently quit or was fired and is looking for a job in an economy that is not experiencing a recession. It is not an unhealthy thing because it is usually caused by workers trying to find a job that is most suitable to their skills.
- Frictional unemployment
happens when the skills set of a worker does not match the skills demanded by the jobs available, or alternatively when workers are available but are unable to reach the geographical location of the jobs.
- Structural unemployment
It happens when a worker decides to leave a job because it is no longer financially compelling. An example is a worker whose take-home pay is less than his or her cost of living.
- Voluntary unemployment
caused by various reasons that come from both the demand side, or employer, and the supply side, or the worker.
Unemployment
caused by high interest rates, global recession, and financial crisis. From the supply side, frictional unemployment and structural employment play a great role.
Demand-side reductions
The impact of unemployment can be felt by both the
workers and the national economy
causes workers to suffer financial hardship that impacts families, relationships, and communities. When it happens, consumer spending, which is one of an economy’s key drivers of growth, goes down, leading to a recession or even a depression when left unaddressed.
Unemployment
results in reduced demand, consumption, and buying power, which in turn causes lower profits for businesses and leads to budget cuts and workforce reductions. It creates a cycle that goes on and on that is difficult to reverse without some type of intervention. The indicators of a country’s economic status.
Unemployment
decline of purchasing power of a given currency over time. A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level of a basket of selected goods and services in an economy over some period of time.
INFLATION
measure of the rate of rising prices of goods and services in an economy. It can occur when prices rise due to increases in production costs, such as raw materials and wages. A surge in demand for products and services can cause inflation as consumers are willing to pay more for the product.
INFLATION
begins with a shortage of service or product, leading to businesses increasing their prices and overall costs of the product. This upward price adjustment triggers a cycle of rising costs, in the process making it harder for businesses to reach their margins and profitability over time.
INFLATION
DIFFERENT TYPES OF INFLATION
Creeping Inflation
Galloping Inflation
Hyperinflation
Stagflation
Deflation
also known as mild inflation or moderate inflation. This type of inflation occurs when the price level persistently rises over a period of time at a mild rate. When the rate of inflation is less than 10 per cent annually, or it is a single digit inflation rate, it is considered to be a moderate inflation.
Creeping Inflation
If mild inflation is not checked and if it is uncontrollable, it may assume the character of ________. Inflation in the double or triple digit range of 20, 100 or 200 percent a year. Many Latin American countries such as Argentina, Brazil had inflation rates of 50 to 700 percent per year in the 1970s and 1980s.
Galloping Inflation
: It is a stage of very high rate of inflation. While economies seem to survive under galloping inflation, a third and deadly strain takes hold when the cancer of hyperinflation strikes. Nothing good can be said about a market economy in which prices are rising a million or even a trillion percent per year . Hyperinflation occurs when the prices go out of control and the monetary authorities are unable to impose any check on it. Germany had witnessed hyperinflation in 1920’s.
Hyperinflation
It is an economic situation in which inflation and economic stagnation or recession occur simultaneously and remain unchecked for a period of time. _________ was witnessed by developed countries in 1970s, when world oil prices rose dramatically.
Stagflation
the reverse of inflation. It refers to a sustained decline in the price level of goods and services. It occurs when the annual inflation rate falls below zero percent (a negative inflation rate), resulting in an increase in the real value of money. Japan suffered from ________ for almost a decade in 1990s.
Deflation
3 CAUSES OF INFLATION
Demand-pull Inflation
Cost-push Inflation
Built-in Inflation
It occurs when the demand for goods or services is higher when compared to the production capacity. The difference between demand and supply (shortage) result in price appreciation.
Demand-pull Inflation
: It occurs when the cost of production increases. Increase in prices of the inputs (labour, raw materials, etc.) increases the price of the product.
Cost-push Inflation
Expectation of future inflations results in __________. A rise in prices results in higher wages to afford the increased cost of living. Therefore, high wages result in increased cost of production, which in turn has an impact on product pricing. The circle hence continues.
Built-in Inflation
