Lesson 25- Economic Growth

Question 1

What are the two areas that economics can be divided into?

Answer 1

Macroeconomics
Microeconomics

Question 2

Define macroeconomics

Answer 2

Study of large economic systems such as those of a whole country or area of the world

Question 3

Define microeconomics

Answer 3

Study of small economics systems that are part of national or international systems

Question 4

What are the 6 macroeconomic objectives?

Answer 4

Reducing unemployment
Protect the environment
Balance of payments
Economic growth
Controlling inflation
Redistribution of income

Question 5

Define national income

Answer 5

Value of income, output or expenditure over a period of time

Question 6

How is economic growth measured?

Answer 6

GDP

Question 7

Define economic growth

Answer 7

An increase in the total output of goods and services in an economy over a period of time/ an increase in the real GDP per capita over a period of time.

Question 8

What is an accurate measure of economic growth

Answer 8

Real GDP per capita

Question 9

State 5 methods to achieve economic growth

Answer 9

1.Discovery of natural resources
2.Increase in investments
3.Human Capital investments
4. Reallocation of resources
5. Improvements in technology

Question 10

4 benefits of economic growth

Answer 10

1. Higher incomes
2. Better infrastructure
3. Higher life expectancy
4. Reduced unemployment

Question 11

6 costs of economic growth

Answer 11

1.Scarce resources in a country will be exploited leaving an opportunity cost for future generations.
2.May lead to unemployment due to the introduction of modern production techniques and equipment
3.An increase in production will lead to an increase in pollution
4. A rise in incomes will lead to a rise in aggregate demand which may cause demand pull inflation
5. May lead to a deficit in the BOP since high incomes will encourage people to import from abroad
6. There will be a opportunity cost as firm will be producing more capital goods that consumer goods.

Question 12

Limitations of GDP 5

Answer 12

1. Economic growth may be misleading if the increase in output is merely an increase in price levels. Therefore the real GDP should be calculated
2. Rising GDP figures can be misleading if there was an increase in population. Therefore GDP per capita should be calculated.
   3.Statistical errors
3. The value of home produced goods
4. Externalities such as pollution can be generated which will lead to a fall in the living standards.

Question 13

What is the economic cycle

Answer 13

This refers to the various stages of real GDP that a country passes through over a period of time