2.5 economic growth

Question 1

how can economic growth happen

Answer 1

an increase in quality or quantity or efficiency in one of the four factors of production: land, labour, capital or enterprise

Question 2

how can land effect economic growth

Answer 2

through the discovery of new resources like oil

Question 3

how can labour effect economic growth

Answer 3

the more people of working age there are the more growth there will be. Raising the retirement age will increase the population of working age.

Improved education will improve labour quality as it will mean that workers have all the skills they need and are more efficient, so output per worker increases

Question 4

how can capital effect economic growth

Answer 4

more machines can be bought and used, even if these are not a technological advancement, so more goods can be produced

Question 5

how can enterprise effect economic growth

Answer 5

government offers tax benefits and grants, they will encourage the development of business, creating jobs and meaning more goods and services are produced, which will increase economic growth

Question 6

how can technological improvements effect economic growth

Answer 6

average cost of production is lower, whether this is because it is quicker to produce or less labour or equipment is needed. Also, it creates new products for the market and this helps to increase consumption and keeps MPC high as there are new things to buy.

Question 7

how can land efficiency economic growth

Answer 7

Efficiency is important in bringing about economic growth as it means less resources are needed to produce each good, so more goods can be produced

Question 8

how can gov keep up efficiency

Answer 8

keep up competition

Question 9

what is actual growth

Answer 9

the percentage change in GDP. It is when the economy is actually producing more goods and services

Question 10

what is potential growth

Answer 10

the change in productive potential of the economy over time shifting the PPF curve outwards

Question 11

what’s an output gap

Answer 11

difference between the actual level of GDP and the estimated long-term value for GDP

Question 12

what’s a negative output gap

Answer 12

GDP is lower than estimated

Question 13

what’s a positive output gap

Answer 13

GDP is higher than estimated

Question 14

what is the trade cycle

Answer 14

This is the periodic but irregular up and down movements in economic activity,
measured by fluctuations in real GDP and other macroeconomic variables

Question 15

what are the characteristics of a boom

Answer 15

high national income
positive output gap
inflationary pressures
high consumption
high investment
wages increase
increased imports (people wants more things)

Question 16

what are the characteristics of a recession

Answer 16

high unemployment
deflationary pressures
low economic growth
less consumption
less investment
wages decrease
negative output gap
decreased imports

Question 17

what are the characteristics of a downturn

Answer 17

output and income fall which leads to a fall in consumption and investment as well as tax revenues. Payments for benefits rise as unemployment rises. People begin to accept jobs for lower wages due to higher levels of unemployment. This causes inflationary pressure to ease and a fall in the number of imports.

Question 18

what are the characteristics of a recovery

Answer 18

national income and output begin to increase with unemployment falling and consumption, investment and imports increasing. Inflationary pressure begins to grow as workers start to demand higher wages.

Question 19

impacts of economic growth on consumers

Answer 19

higher demand for houses as people have more money which increases house prices leading to wealth effect

Improved productive efficiency due to better technology could lead to lower prices
or higher quality goods.

increased happiness

increased inequalities and so may not have any effect on the average consumer and may lead to inflation, which has negative effects for consumers

Question 20

impacts of economic growth on firms

Question 21

impacts of economic growth on government

Question 22

impacts of economic growth on living standards