Macroeconomics Y11 Topic 1: Macroeconomic Objectives - Economic Growth Flashcards
Economic Growth?
% Increase in real GDP economy over a period of time
GDP?
GDP is the total value of output of goods and services produced in an economy over a period of time
Nominal GDP?
The value of goods and services produced by a country in a given period of time
Real GDP?
The value of goods and services produced by a country, having been adjusted for inflation
GDP per Capita?
Total Value of output produced in an economy over a period of time which is adjusted for inflation and expressed per head of population
Total Growth in GDP
The % change in the value of GDP over a period of time
Economic Cycle?
Periods of time where economic growth fluctuates.
Booms?
Peak of economic cycle where GPD is growing at its fastest
Downturn?
Period in the economic cycle where GDP grows, but more slowly
Recession?
Period of temporary economic decline which is identified by a fall in GDP for 2 consecutive quarters
Recovery?
Period in the economic cycle where GDP starts to rise again. Businesses and consumers regain their confidence and economic activity is on the increase.
Aggregate Demand?
Total demand in the economy
Aggregate Supply?
Total amount of goods and services produced in a country at a given price level over a period of time
Inflation?
The sustained increase in the average price level of goods and services in an economy in a given period of time
Overheat?
When demand is rising too fast causing rpices to rise, a situation that governments might try to rectify by raising taxes or when the central bank might try raising interest rates to curb demand
Unsustainable Growth?
Economic Growth that is not possible to sustain without causing environmental problems
Human Capital?
Refers to the level of skill and education of the workforce
National income?
The value of all income in the economy added together and included income wages, profits, dividends, interest and other income earned from abroad
What happens when Economies grow over time?
The amount of goods and services provided by a country increases each year. This means that National Incomes will rise.
What does it mean when the percentage change in real GDP is greater than 0?
Economy is Growing
If the percentage in real GDP is less than 0?
The economy is shrinking
How is GDP measured?
Output Measure - Total Value of the goods and services produced by all sectors of the economy
Expenditure Measure- The Value of the goods and services brought by households and by government, investement in machinery and buildings
Income Measure- the Value of income generated mostly in terms of profits and wages
What is GDP used for?
Settling Interest Rates- If prices are rising too fast, the bank could increase interest rates to try and control them
Planning Economic Policy - If Economy is Shrinking the amount the gov. gets from taxes decreases
Compare Growth between different countries
Limitations of GDP?
Hidden Economy –> Doesn’t capture Unpaid Work in official figures (caring for an elderly relative)
Inequality- GDP doesn’t tell us how income is split across a population. A rising GDP could result from the richest segment getting richer
GDP doesn’t mean higher standards of living (GDP often will increase in war due to increased spending)
Doesnt take into account well being
What other Limitations are there of using GDP as a measure of economic growth?
Inflation Population Changes Statistical Errors Home Produced Goods Hidden Economy External Costs
Why is Inflation a limitation to using GDP as a measure of Economic Growth?
Inflation can make it appear that GDP has risen when actually it might not have
Why are Population Changes a limitation to using GDP as a measure if Economic Growth?
An Increase In Population –> Increase Demand and Increased Workforce etc: –> Higher GDP
Doesn’t tell u the standrads of living in the country
Why are Home Produced Goods a limitation to using GDP as a measure of Economic Growth?
Some goods and services are not Traded and therefore there is no record of these transactions taking place. National income will be understated
Why is the Hidden Economy a limitation to using GDP as a measure of Economic Growth?
GDP figures become innacurate
Why is External Costs a limitation to use GDP as a measure of Economic Growth?
Combustion of fossil fuels –> Good for economy
Bad for the environment
What happens when their is Economic Boom?
High Confidence Increasing Income Increasing Spendng/ Demand Low Unemployment High Inflation High Profits High Investment
What happens during Recession?
Low Confidence Low Spending Low Income Low Business Profit High Unemployment Low SoL High Bankruptcies
What happens during Downturn?
Falling Confidence Falling Spending Income and Unemployment Rising at a slower rate Falling Inflation Investment Rising at a slower rate
