lesson 15: economic growth Flashcards
what is hysteresis?
demand decreases
capital goes unused
over time this capacity and productive potential is lost because its unused
difficult to reopen later
what type of growth is short run?
demand side
we have unused/spare capacity in the economy
what does supply constraints lead to?
demand pull inflation
what determines the long-run growth rate?
the trend growth rate will rise if the quality or quantity of factors of production increases so:
1) education/ training
2) advances in technology
3) increases in investment
what are the short run causes of economic growth?
consumption increases (consumer confidence rises, interest rates fall)
government spending (stimulate output)
businesses investing (confidence rises, sustained increase in demand, low interest rates)
net exports increases (international competitiveness improves)
what are the long run causes of economic growth?
investment in human capital (training, education, improvements in productivity)
increases in net investment (capital stock widened or deepened)
new technology (improving productivity)
what are the costs of economic growth?
pollution
non renewables
urbanisation
winners and losers
what are issues with using real GDP as indicator of living standards in a country?
the unofficial hidden economy is not accounted for in the real GDP and therefore this can make the GDP look smaller than it actually is
what is a problem with comparing GDP to living standards?
sometimes GDP can increase without living standards rising
economic growth doesn’t always improve economic welfare
what is HDI?
a measure of the quality of people lives in the form of human development
it was developed by the UN in 1990 as an indication of living standards taking into account life expectancy, educational achievement and real per capital GDP
what is the chain of reasoning for wages and living standards increasing?
increase in wages
increase in GOODS AND SERVICES
increase in living standards
