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Y1 A Level Economics > Macroeconomics 2.1 Economic Growth > Flashcards

Macroeconomics 2.1 Economic Growth Flashcards

1
Q

What is economic growth?

A

Economic growth is an increase in the productive capacity or potential of the economy.

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2
Q

What is the policy objective of economic growth?

A

The policy objective of economic growth is to enhance the economic output and standard of living.

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3
Q

What are the different stages of the economic cycle?

A

The different stages are boom, downturn, recession, and recovery.

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4
Q

What are real and nominal Gross Domestic Product (GDP)?

A

Real GDP is adjusted for inflation, while nominal GDP is measured at current market prices.

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5
Q

How do you calculate economic growth rates?

A

Economic growth rates can be calculated using the formula: ((GDP in current year - GDP in previous year) / GDP in previous year) * 100.

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6
Q

What is GDP per capita?

A

GDP per capita is the measure of average living standards in a country, calculated by dividing real GDP by the population.

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7
Q

What does SRAS stand for?

A

SRAS stands for Short-Run Aggregate Supply.

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8
Q

What does LRAS stand for?

A

LRAS stands for Long-Run Aggregate Supply.

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9
Q

What is the formula for Aggregate Demand (AD)?

A

AD = C + I + G + (X - M) where C is consumption, I is investment, G is government spending, X is exports, and M is imports.

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10
Q

What are the three withdrawals from the circular flow?

A
  • Savings
  • Taxes
  • Imports
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11
Q

What are the three injections into the circular flow?

A
  • Investment
  • Government spending
  • Exports
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12
Q

What are two factors that affect consumption decisions?

A
  • Disposable income
  • Consumer confidence
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13
Q

What are two factors that affect investment decisions of firms?

A
  • Interest rates
  • Business expectations
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14
Q

What shifts SRAS?

A

Factors such as changes in production costs, supply shocks, and changes in the price of inputs.

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15
Q

What shifts LRAS?

A

Factors such as technological advancements, increases in resources, and improvements in productivity.

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16
Q

What is the multiplier?

A

The multiplier is a factor that quantifies the change in economic output resulting from an initial change in spending.

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17
Q

What is the accelerator?

A

The accelerator is an economic concept that describes how investment levels change in response to changes in demand.

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18
Q

Write one formula for calculating the multiplier.

A

Multiplier = 1 / (1 - MPC) where MPC is the marginal propensity to consume.

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19
Q

What is replacement investment?

A

Replacement investment refers to spending to replace worn-out or obsolete capital.

20
Q

What is short-term economic growth?

A

Short-term economic growth is an increase in the output of goods and services in the economy over a short period.

21
Q

Name three policies that could be used to stimulate AD.

A
  • Increased government spending
  • Tax cuts
  • Lower interest rates
22
Q

What is the trend rate of economic growth?

A

The trend rate of economic growth is the long-term average rate of growth an economy can sustain.

23
Q

What are the costs and benefits of economic growth?

A

Benefits include increased employment and higher incomes; costs may include environmental degradation and income inequality.

24
Q

What does net investment mean?

A

Net investment refers to the total amount of investment in an economy minus depreciation.

25
Q

What is the relationship between GDP and recession?

A

A recession is typically defined as two consecutive quarters of negative GDP growth.

26
Q

What is the impact of inflation on economic growth?

A

Inflation can erode purchasing power but may also stimulate spending if consumers expect prices to rise.

27
Q

True or False: Economic growth is always beneficial.

A

False. Economic growth can bring about negative consequences such as environmental issues and increased inequality.

28
Q

What is the impact of government intervention on short-term economic growth?

A

Government intervention can stimulate short-term growth but may lead to inflationary pressures.

29
Q

What is a benefit of economic growth related to disposable income?

A

Increased disposable incomes

Higher disposable income allows consumers to spend more, improving overall economic health.

30
Q

What impact does economic growth have on employment?

A

Increased employment

Economic growth often leads to the creation of new jobs as businesses expand.

31
Q

How does economic growth affect government finances?

A

Improved government finances

Economic growth increases tax revenues, which can help reduce budget deficits.

32
Q

What is the relationship between economic growth and inequality according to the Kuznets Curve?

A

Initial increase in inequality, followed by a decrease as growth continues

The Kuznets Curve suggests that as an economy grows, income inequality may initially rise before it falls.

33
Q

What is the Environmental Kuznets Curve?

A

Shows the relationship between GDP per capita and environmental degradation

It suggests that pollution may increase with economic growth initially but decrease after reaching a certain income level.

34
Q

True or False: Economic growth always leads to reduced inequality.

A

False

Economic growth can initially widen the inequality gap before potentially reducing it.

35
Q

Fill in the blank: Economic growth can lead to increased _______ from the consumption of different goods and services.

A

utility

Increased utility indicates greater satisfaction and value derived from goods and services.

36
Q

What are two environmental costs of economic growth?

A
  • Faster depletion of natural resources
  • Increased negative externalities such as pollution

These costs highlight the trade-offs involved in pursuing economic growth.

37
Q

What does the Lorenz Curve illustrate?

A

Income and wealth distribution in an economy

It visually represents how income is distributed among the population.

38
Q

What is one potential problem with the Kuznets Curve model?

A

It may not accurately reflect the impact of growth on all income groups

Different regions and contexts can lead to varying experiences of inequality.

39
Q

What can increased economic growth lead to in terms of healthcare?

A

Increased spending on healthcare

More resources become available for public health initiatives and services.

40
Q

What is the accelerator effect in relation to economic growth?

A

Higher investment leading to increased productivity

This effect can result in more efficient production processes and innovation.

41
Q

What is a key evaluation point regarding the benefits of economic growth?

A

However, it can exacerbate inequality

This point highlights the complexity of economic growth’s impact on society.

42
Q

What are two sources of increased taxation receipts from economic growth?

A
  • More Income Tax revenue
  • More corporation tax revenue due to increases in firms’ profits

Increased profits and wages expand the tax base, leading to higher government revenues.

43
Q

How does economic growth contribute to technological advancements?

A

Higher rates of investment leading to technological improvements

Investment in new technologies can enhance production efficiency and innovation.

44
Q

What is a potential outcome for population happiness as a result of economic growth?

A

Potentially a happier population with higher social welfare

Economic growth can improve living standards and overall well-being.

45
Q

What role does government intervention play in addressing negative externalities?

A

It aims to correct market failures and achieve social optimum levels of output

Government policies can help mitigate the adverse effects of economic growth on the environment.

Y1 A Level Economics (14 decks)

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