Economic Growth 4 (J) done

Question 1

economic growth definition

Answer 1

the increased capacity of an economy to satisfy more of its consumers wants and needs over a given period of time, usually one year

Question 2

economic growth should mean increased…

Answer 2

living standards, if the productive capacity growth is faster than population growth

Question 3

aggregate demand is determined by:

Answer 3

• level of employment
• level of disposable income
• consumer confidence
• interest rates

Question 4

aggregate supply is determined by:

Answer 4

• cost in inputs
• access to resources
• government policy
• natural disasters

Question 5

nominal GDP:

Answer 5

not adjusted for inflation

Question 6

nominal GDP formula:

Answer 6

real GDP x price index for given year
_______________________________________
100

Question 7

real GDP:

Answer 7

accounts for inflation

Question 8

real GDP formula:

Answer 8

nominal GDP (GDP at current prices)
_______________________________________ X 100/1
price index for the given period

Question 9

real GDP growth rate formula

Answer 9

GDP year 2 - GDP year 1
__________________________ x 100
GDP year 1

Question 10

3 methods of measuring GDP

Answer 10

1. income received method
2. total expenditure method
3. values added method (production/output)

Question 11

income received method:

Answer 11

people receive an income in return for the resources they contribute to production, value of production can be measured in terms of income received. Information is available from taxation records

Question 12

total expenditure method:

Answer 12

the money people are prepared to spend on goods and services can be measured through market transactions

Question 13

value added method:

Answer 13

at each stage of production, an output can be either sold as a finished good, or used as an input for another good

Question 14

4 things to avoid when compiling GDP

Answer 14

• multiple counting
• intermediate goods are not counted
• used goods are not counted
• transfer payments do not count

Question 15

real GDP per capita:

Answer 15

the volume and quality of goods and services produced per head of population per unit of time

Question 16

APF

Answer 16

shows the difference levels of productivity/ output from different combinations of labour/capital input.
combinations eg.
increased labour
increased capital
increased training and education

Question 17

GDP per capita formula

Answer 17

GDP
______________
population

Question 18

productivity formula

Answer 18

input
________
output

Question 19

productivity:

Answer 19

• level of technology per worker
• level of physical capital per worker
• level of human capital per worker

Question 20

law of diminishing returns

Answer 20

with each additional input, output goes down

Question 21

sources of EG: demand factors

Answer 21

• population growth
• the basis of demand is long term population growth
• increases demand for g/s
• adds to the supply of labour
• desire of people to increase their welfare based on increased income levels

Question 22

sources of EG: supply factors

Answer 22

• growth dependant on the ability to supply the demand for the greater satisfaction of wants
• increase the amount of capital equipment per worker
• assists in the efficient production process
• expanding resources base or using present resource base more effectivly

Question 23

land: quantitate supply factors and qualitative supply factors

Answer 23

Quan: exploration location of iron ore, reclamation of land irrigation
Qual: scientific techniques, fertilisation

Question 24

labour: quantitate supply factors and qualitative supply factors

Answer 24

Quan: migration - import skills
Qual: training courses

Question 25

capital: quantitate supply factors and qualitative supply factors

Answer 25

Quan: increased savings - investment
Qual:

Question 26

enterprise: quantitate supply factors and qualitative supply factors

Answer 26

quan: innovation
qual: management training

Question 27

technical efficiency:

Answer 27

combining resources more productivly

Question 28

allocative efficiency:

Answer 28

minimising waste of resources by directing resources to where they are most useful

Question 29

dynamic effiency:

Answer 29

the ability to adapt and change over time

Question 30

benefits of EG

Answer 30

• increase in goods available for consumption
• facilitates income redistribution (trickle down)
• increase in general standard of living
• increase in production
• wealth generates may trickle down to those who are poor by means of income distribution
• improvement in welfare funded by income distribution

Question 31

costs of EG

Answer 31

• not all income distributed equally
• wealth often in the hands of a few
• “trickle down” does not always seem to work in practice
• corruption may reduce redistribution effects
• spending on weapons do not benefit population as a whole
• inflation risks
• environmental problems - pollution

Question 31

GDP does not take into account

Answer 31

• household work
• voluntary work
• cash transactions (not included in tax returns)
• productivity (input/output)
• changes in quality of goods and services
• externalities
• unemployment, hours worked, working conditions