Macro economic growth

Question 1

What is Short run economic growth?

Answer 1

Short run economic growth is changes in real national output (GDP) and capacity utilisation is high eg. Shifts in demand

Question 2

Factors affecting short run economic growth

Answer 2

Economic downturn in a major trading partner
Increased taxes and cuts to welfare benefits
Rise in unemployment rate

Question 3

What is long run economic growth

Answer 3

Long run economic growth is changes in the productive capacity of an economy eg. improvements in Q&Q of FOPS

Question 4

Factors affecting long run economic growth

Answer 4

Changes in availability of labour supply for production
Changes in stock of capital inputs eg. from foreign direct investment
Improvements in productivity of inputs eg. 5G network UK

Question 5

How to indicate sustainable economic growth?

Answer 5

LRAS shifting to the right

Question 6

Benefits of economic growth

Answer 6

Increased goods available for consumption
Increased standards of living & welfare
Improved social services eg. healthcare & education

Question 7

Costs of economic growth

Answer 7

Income & Wealth redistribution
Environmental impact
Social impact on culture, stress, crime etc.

Question 8

Key constraints on economic growth

Answer 8

Primary export dependency eg. vanilla in Madagascar
Insufficient Private Saving eg. debts reducing spending
Gaps in infrastructure

Question 9

Macro-economic policy conflicts

Answer 9

Unemployment and inflation
Economic growth and inflation
Economic growth and balance of payments
Economic growth and income inequality

Question 10

Phillips curve

Answer 10

The Phillips curve shows the trade off between inflation and unemployment.

Question 11

Evaluation for macro-economic policy conflicts

Answer 11

*Depends on a country’s position on economic cycle
*Keynesian vs Classical
*Objectives may conflict in short run, but not long run eg. cutting taxes to attract FDI.