3.2 economic growth Flashcards
(24 cards)
actual growth
actual growth refers to the realised increase in real national output for a given period of time
potential growth
potential growth refers to an increase in the economy’s productive capacity over a given time period
sustained growth
sustained growth refers to a positive and stable growth rate, without significant upward pressure on the general price level, over an extended period of time
sustainable growth
sustainable growth indicates a rate of growth that can be
maintained without creating other significant economic
problems (such as depleted resources and environmental
problems), particularly for future generations. It implies a positive and stable growth rate over an extended period of time.
inclusive growth
inclusive growth indicates a rate of growth that is sustained over a period of time, is broad-based across economic sectors, and creates productive employment opportunities for the majority of the country’s population
budget surplus
budget surplus is when budget expenditure is less than budget revenue
budget deficit
budget deficit is when budget expenditure is more than budget revenue
progressive tax
progressive tax refers to a tax whose average rate with respect to income rises as income rises
regressive tax
regressive tax refers to a tax whose average rate with respect to income falls as income rises
direct tax
direct taxes are paid directly by the taxpayer to the tax authorities. such taxes include personal income tax, tax on companies’ income and tax on capital and wealth
indirect tax
indirect taxes are taxes imposed on each unit of output produced or transacted
discretionary fiscal policy
discretionary fiscal policy refers to deliberate changes in government expenditure or level of direct taxes in order to influence the level of aggregate demand
expansionary fiscal policy
expansionary fiscal policy refers to increasing government development expenditure or decreasing direct taxes
crowding out effect
the crowding-out effect occurs when an increase in government expenditure (G) results in a fall in investment expenditure (I)
overheating
overheating occurs when the aggregate demand is increasing so fast that it cannot be met by the economy’s productive capacity, leading to high inflation
interest rate monetary policy
interest rate monetary policy involves regulating the money supply in the economy or manipulating the rate of interest to influence the level of economic activity
expansionary interest rate monetary policy
expansionary interest rate monetary policy refers to an increase in the supply of loanable funds to decrease increase rates
liquidity trap
a liquidity trap occurs when interest rates become so low that expansionary monetary policy no longer becomes effective
exchange rate appreciation
an exchange rate appreciation refers to a rise in the free-market exchange rate of the domestic currency with foreign currencies
exchange rate depreciation
exchange rate depreciation refers to a fall in the free-market exchange rate of the domestic currency with foreign currencies
marshall-lerner condition
the marshall-lerner condition states that a depreciation will improve net export expenditure (X-M) only if the absolute sum of the price elasticities of demand for exports and imports is greater than 1
supply-side policies
supply-side policies are designed to affect aggregate supply by affecting costs or productivity
market-oriented supply-side policies
market-oriented supply-side policies increase AS by freeing up the market
interventionist supply-side policies
interventionist supply-side polices increase AS through direct government intervention to counteract the deficiencies of the market
