Theme 2: Economic Supply

Question 1

Causes of economic growth short run

Answer 1

Short term - increase in demand
AD = (C + I + G + (X -M))
- reduction in interest rates
- increase in investment
- increase in g reduction in tax
-fall in exchange rates

Question 2

Causes of long term economic growth

Answer 2

Increase in potential growth
increase in qty/quality of factors of production

-increase in productivity
-advancement of technology
-increase in investment
-improvement in infrastructure
-increase in net investment

Question 3

Negative output gap

Answer 3

Actual growth less than potential growth h

Question 4

Stages of economic cycle

Answer 4

Boom
Slowdown
Recession
Recovery