Economic Growth

Question 1

Economic Growth definition

Answer 1

Sustained rise in a country’s productive potential and real national output. i.e. higher productivity and gains from innovation and rising real incomes

Question 2

Causes Economic Growth (short run)

Answer 2

• Fiscal policy (changes in government spending and taxation)
• commodity prices
• changes in interest rates
• currency changes
• Trading conditions in other countries
• confidence of businesses and households

Question 3

Causes Economic Growth (long run)

Answer 3

• Investment
• Productivity
• Labour supply
• R&D
• Innovation
• Enterprise

Question 4

Export Led growth (pros)

Answer 4

• Exports = injection into circular flow
• Revenues + profits for businesses -> increase in investment
• Countries with fast growing exports -> increased investment

Question 5

Export Led Growth (cons)

Answer 5

• Over-dependence (vulnerable to shocks)
• Protectionist approach from other nations
• Production capacity allocated to exporting should be used for domestic needs and wants
• demand pull inflation
• unsustainable e.g. environmental degredation