2.5. Economic Growth Flashcards
(27 cards)
What are the four factors of production that, when increased in quality or quantity, cause economic growth?
Land, labour, capital, and enterprise.
What impact does the discovery of new resources, such as oil, have on economic growth, particularly in developing countries?
It tends to lead to large growth rates, especially in developing countries.
What are the three ways the size of the workforce can change?
Immigration, demography (age profile), and participation rates.
How can governments encourage mothers to return to work, thereby increasing participation rates in the workforce?
By providing free childcare.
How can improving the quality of labour, through education, affect structural unemployment?
It can reduce structural unemployment by increasing occupational mobility.
How do tax benefits and grants from the government impact the development of businesses and economic growth?
They encourage business development, creating jobs and increasing production.
How does technological progress contribute to economic growth by affecting production costs?
It lowers the average cost of production.
How does the government ensure efficiency to bring about economic growth?
By maintaining competition.
What happens if governments intervene too much to ensure efficiency?
They can cause inefficiency through government failure rather than market failure.
What is the difference between actual and potential growth?
Actual growth is the percentage change in GDP, while potential growth is the change in the productive potential of the economy.
What does the Production Possibility Frontier (PPF) show?
The potential output of the economy.
What is export-led growth and how does it affect economic growth?
A rise in AD through increased exports; it increases AD and can lead to long-term investment and labor demand.
What is the long-run trend rate of growth?
The average sustainable rate of economic growth over a period of time.
What is an output gap?
The difference between the actual level of GDP and the estimated long-term value for GDP.
What are the characteristics of a positive output gap?
GDP is higher than estimated.
According to classical economists, how is a positive output gap filled?
By long-run economic growth, a recession, or a rise in the costs of production.
What are the four main phases of the trade cycle?
Boom, downturn, recession (slump), and recovery.
During which phase of the trade cycle is the economy likely working above the PPF?
Boom.
What is a common characteristic of a recession in terms of unemployment?
High unemployment.
In the UK, how is a recession defined?
Where real GDP falls in at least two successive quarters.
How does economic growth typically affect house prices?
Increases demand for housing, leading to higher house prices.
How does economic growth affect business confidence?
It improves business confidence.
How does increased investment from businesses and governments influence technology?
It leads to improved technology through research and development.
How does economic growth impact tax revenues for the government?
Tax revenues rise.
