Chapter 18 Flashcards
What is economic growth?
Economic growth is an increase in the real GDP occurring over some period of time and an increase in real GDP per capita which is the average share of each citizen in real GDP.
How is economic growth calculated?
Economic growth is calculated as a percentage rate of growth per quarter or per year
How can society increase its economic growth?
- Increase in factors of production. Increase in inputs, increase the GDP
- Increase in resource productivity. When education, health, training, and motivation of workers are improved
- Growth in SA. improved products and services added leisure and
What are the 4 phases of a business cycle?
- Peak
- Recession
- Trough
- Growth/expansion
What is a peak in the business cycle?
Peak - business activity is at its temporary maximum. The economy is near or at full employment and the level of real output is at or very close to the economy’s capacity. The price level is likely to rise during this phase
What is a recession in the business cycle?
Recession - decrease in total output, income, and employment. There will be a contraction in business activity
What is a trough in the business cycle?
Trough - opposite of the peak, bottom of the recession. Output and employment at the lowest level could be short-lived or quite long
What is a growth/expansion in the business cycle?
Growth/expansion - GDP increases, income, and employment increase, this is where inflation will occur
What business are affected most by the business cycle?
Firms and industries producing capital goods and consumer durables are affected most by the business cycle.
When in the business cycle is unemployment experienced?
Unemployment is experienced during a recession. This is because labour is a derived demand, and spending affects labour.
Who are the unemployed individuals?
Unemployed individuals are those who are 15 years and older, are not in paid employment or self-employment and are available for paid employment or during the seven days preceding the interview and took specific steps during the four week preceding the interview to find paid employment
Whats the labour force?
The labour force is made up of people able to and willing to work, must be 15 years and older, actively looking for employment
What is the employment rate?
The unemployment rate is the percentage of labour that is unemployed divided by the labour force
How do you calculate the unemployment rate?
Unemployment rate = (Unemployed/ labour force) x 100
What are the types of unemployment?
- Frictional unemployment
- Structural unemployment
- Cyclical unemployment
What is frictional unemployment?
Frictional unemployment - voluntary unemployment, workers are between jobs. Who left their job as a choice. This consists of search and wait unemployment for workers who are either searching for jobs or waiting to take jobs in the near future
What is structural unemployment?
Structural unemployment - unemployment caused by a mismatch of skills. As the labour force doesn’t respond immediately to a new structure of job opportunities, due to different demands for certain skills.
What is cyclical unemployment?
Cyclical unemployment - this is due to peaks and recessions. Depends on where the business is in the business cycle. It results in insufficient demand for goods and services. Therefore, some workers are left with unmarketable talents.
What is full employment or the natural rate of unemployment (NRU)?
Full employment is the natural rate of unemployment or the natural rate of unemployment (NRU), the economy is to be producing its potential when the number of job seekers equals the number of job vacancies
What is the economic costs and unequal distributions burndens of unemployment?
- Occupation- workers in lower-skilled occupations have higher unemployment rates than workers in higher skilled occupations
- Age- teenagers have much higher unemployment rates than adults
- Race and ethnicity- the employment rate for black Africans is higher than that of Coloureds, Indians, and Whites
- Gender- women have a higher unemployment rate than men
- Province
What is inflation?
Inflation is a rise in the general price level. There must be a sustained increase in the price of goods in general.
Where is inflation found on the business cycle?
Inflation is found at the peak of the business cycle, due to demand-pull inflation
What does inflation do to our purchasing power?
Inflation decreases the purchasing power of money, each rand of income will buy fewer goods and services than before.
What is the main measure of inflation?
The main measure of inflation in South Africa is the Consumer Price Index (CPI).
