Yr 11: Economic Growth & Development Flashcards
Gross domestic product is…
The total value of goods and services produced in an economy in a given period of time
Economic growth is…
An increase in GDP from the previous year
Economic development is…
A sustainable increase in the overall standard of living in an economy
What are some indicators of economic development?
Education levels
Life expectancy
Industrialisation
Poverty rates
Gini coefficient
Greenhouse gas emissions per capita
Air pollution
Water pollution
What are the 3 injections in an economy?
Investment
Government spending
Exports
What are the 3 leakages in an economy?
Savings
Taxation
Imports
In year 1, GDP is $500m. In year 2, GDP is $600m. In Year 3, GDP is $650m. What was GDP growth in Year 2?
20%
In year 1, GDP is $500m. In year 2, GDP is $550m. In Year 3, GDP is $650m. What was GDP growth in Year 2?
10%
In year 1, GDP is $500m. In year 2, GDP is $575m. In Year 3, GDP is $650m. What was GDP growth in Year 2?
15%
In year 1, GDP is $500m. In year 2, GDP is $600m. In Year 3, GDP is $650m. What was GDP growth in Year 3?
8%
In year 1, GDP is $500m. In year 2, GDP is $550m. In Year 3, GDP is $650m. What was GDP growth in Year 3?
18%
In year 1, GDP is $500m. In year 2, GDP is $575m. In Year 3, GDP is $650m. What was GDP growth in Year 3?
13%
The 3 components of HDI are
GDP per capita
Life expectancy
Education levels
Country A has the same levels of GDP per capita and education as Country B, but Country A has a higher HDI. This means that…
Country A has a higher life expectancy
Country A has the same levels of GDP per capita and education as Country B, but Country A has a lower HDI. This means that…
Country A has a lower life expectancy
Country A has the same levels of GDP per capita and life expectancy as Country B, but Country A has a higher HDI. This means that…
Country A has higher education levels
Country A has the same levels of GDP per capita and life expectancy as Country B, but Country A has a lower HDI. This means that…
Country A has lower education levels
What are the 2 causes of economic growth?
Increases in aggregate demand or aggregate supply
What is aggregate demand?
The total demand for all goods and services in the economy
What is aggregate supply?
The total quantity of goods and services that firms are able and willing to produce
AD =
C + I + G + X - M
An economy is in equilibrium if
S + T + M = I + G + X
What are 4 ways the government could increase aggregate supply?
1) Increase competition between firms (such as by prohibiting monopolies)
2) Improving education
3) Decentralising the labour market
4) Building infrastructure
Government policies to shift aggregate demand are called…
Macroeconomic policies
Government policies to shift aggregate supply are called…
Microeconomic policies
In Year 1, income in an economy is $500m and consumption is $300. In Year 2, income is $700m and consumption is $450m. What is the MPC?
0.75
In Year 1, income in an economy is $500m and consumption is $300. In Year 2, income is $700m and consumption is $450m. What is the MPS?
0.25
In Year 1, income in an economy is $500m and consumption is $300. In Year 2, income is $700m and consumption is $450m. What is the multiplier?
4
In Year 1, income in an economy is $800m and consumption is $600. In Year 2, income is $900m and consumption is $630m. What is the MPC?
0.3
In Year 1, income in an economy is $800m and consumption is $600. In Year 2, income is $900m and consumption is $630m. What is the MPS?
0.7
In Year 1, income in an economy is $800m and consumption is $600. In Year 2, income is $900m and consumption is $630m. What is the multiplier?
1.4
An economy has an MPC of 0.6. What is the multiplier?
2.5
An economy has an MPC of 0.8. What is the multiplier?
5
An economy has an MPS of 0.6. What is the multiplier?
1.67
An economy has an MPS of 0.8. What is the multiplier?
1.25
An economy has an MPC of 0.1. What will be the increase in GDP if there is an injection of $200m?
$222m
An economy has an MPC of 0.75. What will be the increase in GDP if there is an injection of $200m?
$800m
An economy has an MPS of 0.1. What will be the increase in GDP if there is an injection of $200m?
$2,000m
An economy has an MPS of 0.75. What will be the increase in GDP if there is an injection of $200m?
$267m
What is the multiplier and why does it happen?
The multiplier is the factor by which an injection will increase GDP. It happens because an initial injection will increase AD, but then the person who earns that income will re-spend some of it, further increasing AD. This process continues, leading to the initial injection having a much bigger overall impact on AD and GDP.
What was Australia’s GDP growth prior to the pandemic?
2%
What was Australia’s GDP growth in 2020 (during the pandemic)?
-6%
What was Australia’s GDP growth in 2021?
9.5%
What was Australia’s GDP growth in 2023?
2.3%
Why did Australia’s growth fall in the pandemic?
- Consumption fell by 20%
- Border closures reduced service exports by 45%
Why didn’t GDP growth fall further in the panedmic?
- Unprecedented fiscal stimulus
- Highly expansionary monetary policy (and unconventional monetary policy)
- Spike in commodity prices
Why did growth recover so strongly in 2021 and 2022?
- Continued effects of expansionary macro policies
- Recovery in consumption and construction after lockdowns
What is expected to happen to growth in 2024?
Growth is expected to fall due to monetary policy being contractionary to combat inflation
What was the V-shaped recovery?
GDP quickly recovered after the covid lockdowns - this was because consumption quickly increased and government support for jobs and businesses in the pandemic had ensured they could quickly return to normal once the pandemic was over.
