Economic growth Flashcards
(16 cards)
Define potential and actual economic growth
Potential economic growth is the expansion of the productive capacity of an economy
Actual economic growth is measured by an increase in actual output
What is the output gap?
The difference between actual real GDP and Potential real GDP
What is the problem with Potential GDP
It’s hard to measure what output would be with full employment
What is productivity and what are the types
Labour productivity and capital productivity
How does an increase in productivity lead to economic growth
There will be an increase in aggregate supply and businesses may invest into more capital goods increasing potential growth
What is human capital
The expertise and skills that contribute to a worker’s productivity
How is human capital increased
Investment in training and education and in possible cases healthcare
What is the trade/business cycle
When GDP fluctuates around its trend such as boom, slump, recession, trough
What are benefits of economic growth
- Standard of living
- Higher incomes
- Employment opportunities
What are the costs of economic growth
- Possible pollution
- Inflation
- Wealth inequality could mean no effects
What is PPP
Purchasing power parity, the amount of the same good you can buy with the same amount of money in a different country/currency
What is GDP
The market value of all final goods and services produced within a country in a given period of time
What is GNI
GDP including investment income from abroad
What is GNP
GDP of citizens
What is the UK national wellbeing
- a measure of how households believe heir lives are improving
What is the correlation between real incomes and happiness
at low incomes there is a positive correlation but at higher incomes there is a weaker correlation
