Economic Growth Flashcards
(17 cards)
What is economic growth?
Change in national output over time
What is short run economic growth?
The increase in actual GDP, and output of goods and services
What is long run economic growth?
An increase in the productive potential of an economy
What is the economic cycle?
1.Boom
2.Slowdown
3.Recession
4.Recovery
What is the Boom in the economic cycle?
The rate of actual economic growth exceeds the trend rate, output gap is narrowed
What is the Slowdown in the economic cycle?
Growth rates fall and approach zero
What is the Recession in the economic cycle?
Two consecutive periods of negative growth
What is the Recovery in the economic cycle?
Growth becomes positive after a recession
What is real GDP?
Takes inflation into account
What is nominal GDP?
At current prices, doesn’t look at inflation
How do you calculate economic growth rates?
(Change in GDP divided by original GDP) x100
What is GDP per capita ?
The average level of income per person
How do you calculate GDP per capita?
GDP divide by population
What are the causes of economic growth
> shifts in aggregate demand/supply
change in components AD
injection/leakage from circular flow of income
alterations in macroeconomic policy measures
change in factor input prices
productive potential change
increase in quality and quantity of factors of production
What are the benefits of economic growth?
> rise in average household income
reduced unemployment- creation of job opportunities
rise in material standard of living
reduction in absolute poverty levels
improvements in public services- through tax
What are the consequences of economic growth?
> demand-pull inflationary pressure as spare capacity is used up
rising income inequality
relative poverty could rise
environmental degradation through divergence between MSC + MPC
What does the Kunznet curve show?
The relationship between economic growth and inequality
