2.5 Economic Growth

Question 1

Define export-led economic growth and provide an example

Answer 1

• growth that occurs as a result of an increase in the sale of goods and services to foreign countries - China experienced export-led growth from 1988 to the global financial crisis of 2008.

Question 2

Seven KEY macroeconomic objectives for the government

Answer 2

• Low unemployment
• Low and stable rate of inflation
• Economic growth
• Balance of payments equilibrium on current account
• Greater income equality
• Balanced government budget
• Protection of the environment

Question 3

Budget deficit?

Answer 3

• when government expenditure exceeds tax receipts in a financial year. Vice versa for budget surplus.

Question 4

Provide a couple of limitations of fiscal policy

Answer 4

• Maybe be ineffective if current interest rates are substantially high. (Demand wont increase as much)
• There is a significant time lag associated with it
• If the Government spends too much, there could be difficulties paying back debt - more difficult to borrow in future.