2.5 Economic Growth Flashcards
1
Q
What causes economic growth?
A
an increase in the quality or quantity of one of the FOPs
2
Q
Actual growth
A
the percentage increase in a country’s real GDP + caused by an increase in AD
3
Q
Potential growth
A
long run expansion in the productive potential of an economy + caused by increases in AS
4
Q
Negative output gap
A
occurs when the actual level of output is less than the potential level of output
5
Q
Positive output gap
A
occurs when the actual level of output is greater than the potential level of output
6
Q
Benefits of economic growth (think economic agents)
A
higher disposable incomes, higher employment, higher profits for firms, fiscal dividend for govt
7
Q
Cons of economic growth
A
inflation (dp), income inequality, environmental costs, current account deficit
