growth and development Flashcards
(22 cards)
What is short-run economic growth?
An increase in real GDP
What is long-run economic growth?
An increase in the productive potential of the economy, shown by a rightward shift of LRAS, often due to improvements in factors of production.
How do advances in technology lead to economic growth?
They increase capital productivity, allowing more output from the same inputs, which shifts LRAS right.
How can population growth cause long-run economic growth?
It increases the labour supply, which can raise output and productive capacity if matched with jobs and capital.
How does education and training contribute to economic growth?
It provides a more skilled labour force, raising productivity, employment and international competitiveness, shifting LRAS right.
Why is business investment important for growth?
It raises the capital stock, boosting both short-run AD and long-run productive capacity (LRAS).
How do supply-side policies promote growth?
By improving incentives (e.g. tax cuts), cutting costs (e.g. deregulation), or boosting productivity, leading to LRAS increases.
How does infrastructure investment affect growth?
It reduces production and transport costs, increases productivity, and attracts foreign direct investment (FDI).
What is economic development?
A broader concept than growth, focused on improving quality of life, reducing poverty, and increasing sustainability.
Name three common indicators of economic development.
GDP per capita, life expectancy, and average years of schooling.
What are the three components of the Human Development Index (HDI)?
- Knowledge (mean years of schooling), 2. Life expectancy, 3. GNI per capita (adjusted for PPP).
Give one limitation of HDI as a measure of development.
It doesn’t account for inequality or the quality of education and services.
How does corruption act as a barrier to growth and development?
It misuses public resources, reduces government effectiveness, and discourages investment.
Why is lack of property rights a barrier to development?
Without legal ownership, firms and individuals are less likely to invest, limiting growth and entrepreneurship.
How does poor infrastructure act as a barrier to growth?
It raises costs, limits mobility, discourages FDI, and reduces productivity.
How can high government debt hinder development?
It limits public investment in essential services and may lead to higher taxes or inflation.
What is trade liberalisation and how does it support growth?
The removal of trade barriers like tariffs, promoting exports, global trade, and efficiency through competition.
How does privatisation support economic development?
It transfers state firms to the private sector, improving efficiency, productivity, and competitiveness.
What are examples of interventionist strategies to boost development?
Public investment in infrastructure, education, or healthcare to raise productivity and living standards.
How do demand-side macroeconomic policies promote growth?
Expansionary fiscal or monetary policy boosts AD, raising real GDP and potentially increasing investment.
What are examples of microeconomic development strategies?
Taxes on negative externalities, subsidies for merit goods, and redistributive policies to improve access to services.
How do redistributive policies help with development?
They reduce inequality by funding health, education, and welfare, improving social mobility and productivity.
