Economic Growth- TB

Question 1

What is long-run economic growth?

Answer 1

The expansion of the productive capacity of an economy

Question 2

What is short-run economic growth?

Answer 2

An increase in actual GDP

Question 3

What is a nominal value?

Answer 3

Value of an economic variable based on current prices, taking no account of changing prices throughout time

Question 4

What is a real value?

Answer 4

Value of an economic variable, taking account of changing prices through time

Question 5

What is real GDP?

Answer 5

GDP at constant prices, taking account of changing prices through time

Question 6

What is nominal GDP?

Answer 6

GDP at current prices, taking no account of changing prices through time

Question 7

What 4 things do you increase the potential output of to achieve long-run economic growth?

Answer 7

Improved quantity or quality of:
1) Land
2) labour
3) Capital
4) Enterprise
(FOP)

Question 8

How can short-run economic growth be achieved?

Answer 8

Using more:
1) Land
2) Labour
3) Capital
4) Enterprise
(FOP)

Question 9

What is the best ‘quantity’ improvement?

Answer 9

Roads- benefits everyone & increases amount of businesses that can use them

Question 10

What is the best ‘quality’ improvement?

Answer 10

Specialisation- improves each workers skill at carrying out their work as they can improve

Question 11

How do you show 1) short-run & 2) long-run economic growth on a PPC curve?

Answer 11

1) Point moving further towards PPC
2) PPC shifting right

Question 12

What is gross national income (GNI)?

Answer 12

GDP plus income from abroad

Question 13

What is seasonal adjustment?

Answer 13

When seasonal fluctuations in a variable are smoothed to reveal the underlying trend

Question 14

What is GDP per capita?

Answer 14

Average level of GDP per head of population

Question 15

What is labour productivity?

Answer 15

Measure of output per worker or output per hour worked

Question 16

What is capital productivity?

Answer 16

measure of output per unit of capital

Question 17

What is total factor productivity?

Answer 17

Average productivity of all factors measured as the total output divided by the total amount of inputs used

Question 18

What is human capital?

Answer 18

Stock of skills & expertise that contribute to a worker’s productivity, increased through education & training

Question 19

What is the economic cycle?

Answer 19

A phenomenon whereby GDP fluctuates around an underlying trend, following a regular pattern

Question 20

What is a recession?

Answer 20

When an economy’s real GDP falls for 2 consecutive quarters (quarter of a year)

Question 21

What is indexing?

Answer 21

Taking a base year to allow easy comparisons to that year

Question 22

What is the equation for a price index?

Answer 22

Nominal GDP ÷ real GDP x 100

Question 23

How do you work out % change?

Answer 23

100 (New value ÷ old value) -100

Question 24

How do you work out GDP per capita?

Answer 24

GDP ÷ population

Question 25

When is SR economic growth possible?

Answer 25

If economy is below full employment

Question 26

How is short run economic growth shown on a PPC diagram?

Answer 26

A movement to the PPC from a position within the curve

Question 27

What 2 things can short run economic growth be caused by?

Answer 27

1) Increase in AD 2) Increase in short run AS

Question 28

What does 1) economic growth & 2) recession reflect?

Answer 28

1) Rising output 2) Falling output

Question 29

What are 2 benefits of economic growth?

Answer 29

1) Improves living standards if GDP is greater than population 2) Higher RDI- improve environment, more luxuries etc

Question 30

What is a disadvantage of recession?

Answer 30

A longer and deeper recession leads to more unemployment & reducing living standards to a larger extent

Question 31

Why is economic growth important?

Answer 31

It's the main way of measuring how living standards of a country's population is changing

Question 32

What is inflation?

Answer 32

The rate of change of the average price level

Question 33

What is an index number?

Answer 33

A way of comparing the value of a variable with a base observation

Question 34

What is consumer price index (CPI)?

Answer 34

A measure of the general level of prices in the UK, as a measure of the government's inflation target

Question 35

What is retail price index (RTI)?

Answer 35

A measure of the average level of prices in the UK

Question 36

What is deflation?

Answer 36

A fall in average price levels (negative inflation)

Question 37

What is disinflation?

Answer 37

A fall in the rate of inflation (less inflation than previouslt)

Question 38

What is hyper inflation?

Answer 38

When inflation reaches extreme or excessive rates

Question 39

What are 2 measures of the price level?

Answer 39

1) Consumer price index (CPI) 2) Retail price index (RPI)

Question 40

What is cost-push inflation?

Answer 40

Inflation being caused by an increase in the costs faced by firms arising on the supply side of an economy

Question 41

What is demand-pull inflation?

Answer 41

Inflation caused by an increase in AD

Question 42

What is money stock?

Answer 42

The quantity of money in the economy

Question 43

What are 6 consequences of persistently high inflation?

Answer 43

1) Increased inequality 2) Falling real incomes 3) Resource allocation difficulties 4) Risks of wage inflation 5) Uncertainty (less I) 6) Menu & shoe-leather costs

Question 44

What are 2 advantages of high inflation?

Answer 44

1) Reduced real value of debt 2) Facilitates economic growth

Question 45

What are 3 disadvantages of high inflation?

Answer 45

1) Fiscal drag- gvnmt doesn't increase tax brackets with inflation, increasing tax on income worth less 2) Increased costs 3) Uncertainty

Question 46

What does the level of inflation wanted depend on?

Answer 46

What the economic objectives are, if objective is to decrease national debt, high inflation is desirable, if objective is growth, low & stable inflation is desirable