Growth Questions Flashcards

Question

What is endogenous growth theory and why does it matter?

Answer 1

Endogenous growth theory explains technology as a result of investment in knowledge and human capital, suggesting policy can shape growth. ## Footnote Highlights the importance of institutions and incentives.

Answer 2

Differences in industrial structure, education, infrastructure, and agglomeration effects lead to regional disparities. ## Footnote Addressing these disparities is key to unlocking growth.

Answer 3

If capital and labour are trapped in unproductive sectors, the economy underperforms. Removing barriers can raise total factor productivity. ## Footnote Weak insolvency laws and regulatory distortions prevent efficient reallocation.

Answer 4

Secure property rights and good governance reduce uncertainty, encouraging investment and innovation. ## Footnote Weak institutions can lead to rent-seeking and discourage productivity.

Answer 5

Yes — high inequality may reduce access to education and increase social unrest, harming long-term productivity. ## Footnote Concentrated income may weaken demand in consumption-led economies.

Answer 6

Well-designed environmental regulation can spur green innovation and resource efficiency, while poor design can deter investment. ## Footnote Balancing externality correction with economic dynamism is key.

Answer 7

TFP can grow through innovation and better resource allocation. ## Footnote Example: Digital tools allowing workers to produce more without increasing inputs.

Answer 8

Factors include underinvestment in capital and skills, low R&D intensity, and regional disparities. ## Footnote Brexit and weak public infrastructure may also contribute.

Answer 9

Yes — productivity gains mean more output per worker and can lead to better resource allocation. ## Footnote Automation may free up labour for high-growth sectors.

Answer 10

Ageing reduces the working-age population and can lower investment and innovation. ## Footnote Policies to boost participation and productivity can offset effects.

Answer 11

Rising productivity should lead to higher real wages, but lagging wage growth may indicate weak bargaining power or rising inequality. ## Footnote Understanding this link helps shape inclusive growth policy.

Answer 12

Firms cannot fully capture spillover benefits of innovation, leading to underinvestment. ## Footnote Public subsidies or tax credits aim to correct this market failure.

Answer 13

Not always — GDP does not account for distribution, environmental damage, or unpaid work. ## Footnote Alternatives like HDI try to address these gaps.

Answer 14

National productivity is an average of firm-level outputs. High productivity firms raise the national average. ## Footnote Understanding firm dynamics is crucial for policy.

Answer 15

Not always. GDP measures output, not distribution, environmental damage, or unpaid work. Alternatives like HDI or inclusive wealth try to account for these gaps. Still, GDP remains a useful benchmark. ## Footnote Communication, Making Effective Decisions, Knowledge of Economics

Answer 16

National productivity is an average of firm-level outputs. If high-productivity firms grow faster or resources shift toward them, national productivity improves. Barriers like skill shortages or poor finance access can prevent this reallocation. ## Footnote Application of Economics, Making Effective Decisions, Delivering at Pace

Answer 17

New technologies often spread unevenly. Frontier firms adopt them quickly, but laggards may struggle. Strong diffusion through skilled workers, competition, and digital infrastructure helps the whole economy benefit from innovation. ## Footnote Application of Economics, Working Together, Delivering at Pace

Answer 18

It raises transaction costs, limits market access, and slows logistics. For example, slow internet hampers digital business; congested roads raise delivery times. This reduces output per input. ## Footnote Knowledge of Economics, Delivering at Pace, Making Effective Decisions

Answer 19

Yes, especially in the short run. If firms automate tasks, they may need fewer workers. Increased efficiency can lower prices, boost demand, and create new industries and jobs over time. ## Footnote Knowledge of Economics, Application of Economics, Making Effective Decisions

Answer 20

Yes, but only in the short term by using more labour or capital. Without improving efficiency, growth will slow or stall. Long-term sustainable growth depends on rising productivity. ## Footnote Knowledge of Economics, Communication, Making Effective Decisions

Answer 21

Not necessarily. Some regions may specialise in lower-productivity but high-employment sectors. Reducing barriers to growth gives all regions the opportunity to raise productivity organically. ## Footnote Making Effective Decisions, Working Together, Application of Economics

Answer 22

Yes — if growth is achieved through resource-intensive methods. Policymakers look to decouple growth from environmental damage through green innovation and sustainable infrastructure. ## Footnote Knowledge of Economics, Application of Economics, Making Effective Decisions

Answer 23

Yes — excessive growth can cause overheating, inflation, environmental degradation, and resource depletion. Balanced growth is often preferable to rapid, unmanaged expansion. ## Footnote Knowledge of Economics, Making Effective Decisions, Communication

Answer 24

There’s a trade-off. High growth may increase inequality if gains aren’t shared, but redistribution without growth can reduce incentives. The best approach is inclusive growth. ## Footnote Application of Economics, Making Effective Decisions, Working Together

Answer 25

Possibly falling labour hours or a shrinking workforce. Productivity = output per worker/hour, so gains in efficiency might be masked by demographic decline or weak demand. ## Footnote Knowledge of Economics, Communication, Making Effective Decisions

Answer 26

Possibly. Tighter credit can drive out inefficient firms, reallocating resources to more productive ones. The net effect depends on the structure of the economy. ## Footnote Application of Economics, Knowledge of Economics, Making Effective Decisions

Answer 27

To support employment, regional development, or strategic aims. Growth isn’t the only policy goal — sometimes equity or resilience matters more. ## Footnote Making Effective Decisions, Working Together, Communication

Answer 28

In the short run, yes — if migrants enter low-skilled jobs, average productivity may fall. But over time, immigration often increases total output and boosts innovation. ## Footnote Application of Economics, Communication, Making Effective Decisions

Answer 29

Yes — initial investment may outpace measured returns. If AI disrupts industries but firms struggle to adapt, productivity might stagnate temporarily. ## Footnote Knowledge of Economics, Delivering at Pace, Making Effective Decisions

Answer 30

Rarely, but in 'degrowth' or post-growth models, the aim is sustainability rather than expansion. These models prioritise wellbeing and environmental goals over GDP growth. ## Footnote Knowledge of Economics, Communication, Making Effective Decisions

Answer 31

Yes — GDP may rise while living standards stagnate due to inequality, poor public services, or environmental harm. Broader indicators like GNI per capita or HDI offer a fuller picture. ## Footnote Knowledge of Economics, Application of Economics, Communication

Answer 32

If market power allows firms to keep gains, workers may not see benefits. Technology can also displace labour, weakening bargaining power. ## Footnote Knowledge of Economics, Working Together, Making Effective Decisions

Answer 33

Yes – innovation can lead to 'technological unemployment' as automation or new methods displace workers. ## Footnote In the short term, certain sectors may shrink. However, growth and new industries often generate new jobs over time.

Answer 34

It suggests that the benefits of growth are not reaching workers, possibly due to rising inequality, inflation outpacing nominal wage growth, or productivity gains being captured by capital rather than labour. ## Footnote Real wages give a better picture of living standards than GDP alone.

Answer 35

Productivity growth improves long-run potential output and competitiveness without necessarily increasing resource use. ## Footnote GDP growth can be driven by temporary factors like population increase or fiscal stimulus.

Answer 36

Potentially. Lower corporate or income taxes may incentivise investment and effort, but the effect depends on how the tax cut is funded. ## Footnote If it reduces public investment in infrastructure or education, the long-term effect could be negative.

Answer 37

Not necessarily. If growth is driven by higher productivity, the economy can expand without creating inflationary pressure. ## Footnote Demand outpacing supply capacity can lead to overheating and inflation.

Answer 38

Yes – for example, if the workforce is shrinking due to ageing demographics or if demand is weak. ## Footnote High productivity means each worker is efficient, but overall output depends on both productivity and the number of workers.

Answer 39

Capital deepening raises labour productivity by increasing capital per worker, such as providing better machinery or software. ## Footnote Diminishing returns mean gains eventually taper off unless complemented by innovation or skills.

Answer 40

It depends. If foreign firms crowd out local businesses or repatriate profits without knowledge transfer, domestic benefits may be limited. ## Footnote However, well-managed FDI can raise productivity through technology spillovers.

Answer 41

Many public services don’t have market prices, making output hard to quantify. ## Footnote Traditional measures may undervalue outcomes or quality improvements.

Answer 42

High uncertainty can deter investment in innovation or capital, slowing productivity as firms delay decisions or hold excess cash. ## Footnote Stable environments tend to foster long-term productivity gains.

Answer 43

Yes, through decoupling – where GDP grows while environmental impacts fall. ## Footnote This requires cleaner technologies and strong environmental regulations.

Answer 44

This could mean the workforce is shrinking or demand is weak. ## Footnote For example, ageing populations can reduce labour supply.

Answer 45

Better education and skills raise efficiency and adaptability of workers, allowing them to use new technologies effectively. ## Footnote High human capital is strongly correlated with innovation and long-term growth.

Answer 46

Yes – if it causes pollution, inequality, or depletes natural resources. ## Footnote GDP doesn’t measure quality of life.

Answer 47

Not always. Gains from job cuts or overwork may reduce welfare. ## Footnote Productivity should ideally be broad-based and support real income growth.

Answer 48

Poor investment quality, weak institutions, or inefficient allocation of capital can limit returns. ## Footnote For example, investing in roads without maintenance won’t boost output.

Answer 49

Reliable broadband and digital tools can raise productivity by speeding up communication and enabling innovation. ## Footnote Benefits depend on digital skills and adoption rates across sectors.

Answer 50

Yes. High inequality can reduce social mobility and weaken human capital investment. ## Footnote It may also limit aggregate demand.

Answer 51

Competition pressures firms to innovate and adopt better practices. ## Footnote In protected markets, productivity tends to be lower.

Answer 52

Yes, in theories like degrowth, where focus shifts from GDP to wellbeing and sustainability. ## Footnote Managing debt and inequality without growth would be extremely difficult.

Answer 53

Low business investment post-Brexit, skills mismatches, regional disparities, and underperforming infrastructure. ## Footnote Uncertainty and tight financial conditions have discouraged long-term innovation.

Answer 54

Higher interest rates are dampening investment and consumer spending. ## Footnote Mortgage costs are up, affecting household demand.

Answer 55

Migration has supported labour supply in key sectors but remains under pressure from housing and infrastructure. ## Footnote Public concern about integration could influence future policy direction.

Answer 56

The focus has shifted towards supply-side reforms: energy security and childcare support. ## Footnote These aim to lift productivity and ease long-term inflationary pressures.

Answer 57

Large gaps remain between London/southeast and the rest due to poor transport links and skills gaps. ## Footnote Levelling-up policies have had mixed results.

Answer 58

Participation has fallen, especially among older workers and those with long-term health issues. ## Footnote This reduces labour supply and limits output.

Answer 59

Short-term: lost output in education and health; longer-term: lower morale and reduced productivity. ## Footnote Public sector unrest affects investor perceptions.

Answer 60

Early gains in professional services and logistics, but uptake is uneven across sectors. ## Footnote Skills shortages in data and tech are a major bottleneck.

Answer 61

UK firms remain cautious, limiting capital deepening essential for long-term productivity. ## Footnote This also weakens innovation and global competitiveness.

Answer 62

No. Potential output is constrained by weak productivity, low investment, and structural barriers. ## Footnote Targeted reform could help close this output gap.

Answer 63

Lower capital intensity, weaker vocational education, and lower R&D investment compared to Germany. ## Footnote Brexit introduced trade frictions and chronic underinvestment has worsened the gap.

Answer 64

Digital transformation, better management practices, and investment in IT infrastructure can help. ## Footnote Reforms must be carefully designed and monitored due to harder outcome measurement.

Answer 65

In theory, yes — through 'green growth' by increasing output while reducing carbon emissions. ## Footnote It requires investment in clean energy and decarbonising industry.

Answer 66

GDP doesn’t capture informal activity, well-being, or quality improvements well. ## Footnote Productivity in services is hard to measure due to lack of market pricing.

Answer 67

Attraction of high-value FDI due to low corporate tax and EU market access. ## Footnote Productivity is inflated by profit shifting from multinationals.

Answer 68

It may ignore distribution, sustainability, and well-being, leading to rising inequality. ## Footnote Broader measures like inclusive wealth can complement growth targets.

Answer 69

Restrictive planning limits housing supply and infrastructure expansion, raising costs and reducing mobility. ## Footnote Reform could unlock agglomeration benefits.

Answer 70

It lowers the working-age share and shifts demand towards lower-productivity services. ## Footnote Productivity gains must compensate to maintain growth.

Answer 71

Reform is often blocked by short-term political costs and local resistance, reducing effectiveness. ## Footnote Long-term plans require cross-party support and policy stability.

Answer 72

Diversify the economy, invest in skills, and upgrade infrastructure in lagging areas. ## Footnote Strengthening social safety nets ensures growth benefits are widely shared.

Answer 73

Investment in physical capital, human capital, technological progress, and institutional quality. ## Footnote Productivity improvements are central.

Answer 74

It enables firms to produce more output from the same inputs, increasing total factor productivity. ## Footnote Adoption lags can delay benefits across the economy.

Answer 75

It explains long-run growth through capital accumulation, labour force growth, and technological progress. ## Footnote It highlights the role of savings and population growth.

Answer 76

Strong institutions shape incentives to invest and innovate, reducing uncertainty and supporting market efficiency. ## Footnote Poor institutions often face capital flight and low FDI.

Answer 77

Human capital improves worker efficiency and adaptability, leading to higher productivity. ## Footnote Mismatches between skills and jobs can limit gains.

Answer 78

Agglomeration occurs when firms and workers cluster in one area, raising productivity and innovation. ## Footnote Rising congestion can offset benefits if infrastructure doesn't keep up.

Answer 79

Trade allows countries to specialise and benefit from technology transfer, stimulating investment. ## Footnote If sectors shrink without replacement, benefits may be uneven.

Answer 80

Differences in infrastructure, skills, and access to finance explain regional disparities. ## Footnote London benefits more due to agglomeration and global connectivity.

Answer 81

Capital deepening increases the capital-to-labour ratio, raising labour productivity but facing diminishing returns. ## Footnote Sustained growth requires combining it with innovation.

Answer 82

Rapid growth can strain natural resources, worsen inequality, and fuel unsustainable debt. ## Footnote Inclusive and sustainable growth is preferred.

Answer 83

Policies aimed to increase the economy’s productive potential by improving efficiency and incentives. ## Footnote These include tax reforms and investment in education.

Answer 84

Yes, rapid growth can strain resources, worsen inequality, and fuel unsustainable debt or asset bubbles. Sustainable growth is preferred.

Answer 85

Policies aimed at increasing the economy’s productive potential by improving efficiency and incentives. Examples include tax reforms and deregulation.

Answer 86

They improve human capital, increasing workforce productivity and adaptability, which drives innovation and raises output per worker.

Answer 87

High-quality infrastructure reduces transaction costs, improves connectivity, and increases efficiency of labour and capital.

Answer 88

They increase incentives to work, save, and invest, boosting retained earnings and capital investment for firms.

Answer 89

It allows firms to hire and fire easily, reducing unemployment and inefficiencies, but excessive flexibility can harm job security.

Answer 90

Deregulation reduces compliance costs and barriers, encouraging entrepreneurship and competition, which drive innovation.

Answer 91

Supply-side policies focus on increasing production capacity, while demand-side policies aim to influence short-term demand.

Answer 92

Yes, by increasing productivity and capacity, they can reduce long-term inflationary pressure.

Answer 93

They take time to implement, can be expensive, politically unpopular, or poorly designed, leading to inequality or environmental harm.

Answer 94

They boost productivity through government support such as R&D tax credits and partnerships, sustaining long-term growth.

Answer 95

Efficiency of public service delivery, measured by output per unit of input.

Answer 96

It can deliver better services without increasing spending, improving human capital and infrastructure.

Answer 97

By streamlining processes and improving outcomes through new technologies and service models.

Answer 98

Challenges include lack of competition, weak incentives, and resistance to change.

Answer 99

Strategic public investment can raise productivity directly or indirectly by enabling private sector efficiency.

Answer 100

Yes, they can bring expertise and innovation, but risks include profit motives distorting priorities.

Answer 101

Performance-based funding and benchmarking can encourage better outcomes, but care is needed to avoid perverse incentives.

Answer 102

Public sector outputs may be non-market, focusing more on quality and broader goals like equity.

Answer 103

Digital tools can improve efficiency and service quality, although upfront investment and skills are needed.

Answer 104

Limits imposed by finite resources, climate change, pollution, and biodiversity loss.

Answer 105

It can reduce productivity and create uncertainty that deters investment.

Answer 106

Yes, through green growth or sustainable development policies.

Answer 107

It describes overuse of shared resources leading to depletion without regulation.

Answer 108

Stricter regulation may raise costs short-term but can drive long-term innovation and health improvements.

Answer 109

Examples include carbon pricing, green investment, and emissions regulation.

Answer 110

Separating economic growth from environmental harm.

Answer 111

They face trade-offs between poverty reduction and sustainability, and climate impacts hit them harder.

Answer 112

Unchecked degradation can reduce output, increase inequality, and provoke political instability.

Answer 113

Output per unit of labour input, measured as GDP per hour worked or per worker.

Answer 114

Measures output growth not explained by inputs, capturing technological progress and efficiency improvements.

Answer 115

It adjusts for population size, showing average income or output per person.

Answer 116

GDP ignores unpaid work, environmental damage, and quality of life factors.

Answer 117

Sustained growth enables higher wages and improved goods and services.

Answer 118

Human Development Index (HDI), Genuine Progress Indicator (GPI), and wellbeing measures.

Answer 119

Using cost-weighted activity indicators, adjusted for quality where possible.

Answer 120

Services often lack tangible outputs and quality varies widely.

Answer 121

Poor data can distort productivity statistics; better data collection is crucial.

Answer 122

Rises might result from job losses or cost-cutting rather than genuine efficiency.

Answer 123

How political institutions and power structures influence economic growth.

Answer 124

Strong institutions promote investment and innovation, while weak ones deter growth.

Answer 125

Good governance ensures effective policy implementation and minimizes corruption.

Answer 126

Democracies often support inclusive institutions, but may face short-term pressures.

Answer 127

Prioritizing short-term projects over long-term investments leads to inefficient allocation.

Answer 128

High inequality can reduce social cohesion and support for pro-growth reforms.

Answer 129

Political opposition from vested interests can block beneficial reforms.

Answer 130

Corruption distorts incentives, reduces trust, and diverts funds from productive uses.

Answer 131

Lower growth in resource-rich countries due to rent-seeking and weak institutions.

Answer 132

Political cycles can lead to inconsistent or underfunded productivity plans.

Answer 133

The ability to absorb, recover from, and adapt to shocks while maintaining growth.

Answer 134

It caused contraction and exposed vulnerabilities but accelerated digital adoption.

Answer 135

Unemployment was cushioned initially, but post-pandemic inactivity rose.

Answer 136

Increased inflation and reduced competitiveness for energy-intensive sectors.

Answer 137

High inflation erodes purchasing power and undermines investment certainty.

Answer 138

Diversification helps spread risk and stabilise growth by reducing reliance on narrow sectors.

Answer 139

High debt limits fiscal space to respond to shocks and can raise borrowing costs.

Answer 140

Long-term damage to potential output following a shock, like prolonged unemployment.

Answer 141

It limits the capacity to recover strongly from economic shocks.

Answer 142

High debt limits fiscal space to respond to future shocks ## Footnote Sustained high debt can raise borrowing costs and crowd out productive investment.

Answer 143

Hysteresis refers to long-term damage to potential output following a shock ## Footnote Prolonged unemployment can reduce skills and participation, permanently lowering growth capacity unless policy intervenes effectively.

Answer 144

They can lead to a permanent lowering of growth capacity following a shock ## Footnote Effective policy intervention is necessary to mitigate these effects.

Answer 145

It suggests limited capacity to recover strongly from shocks ## Footnote Weak productivity growth since 2008 and underinvestment in infrastructure, skills, and R&D have left the economy less adaptive.

Answer 146

Strong automatic stabilisers, flexible labour markets, sound public finances, investment in human capital, and robust supply chains ## Footnote These elements help economies withstand and recover from shocks.

Answer 147

Truss’s approach centred on supply-side economics — using tax cuts and deregulation to stimulate growth.

Answer 148

The mini-budget included £45bn of unfunded tax cuts, including the abolition of the 45p income tax rate and cancellation of the corporate tax rise.

Answer 149

The lack of fiscal credibility triggered a loss of investor confidence, leading to rising gilt yields and a falling pound.

Answer 150

The Office for Budget Responsibility was sidelined during the mini-budget, undermining trust in the UK’s fiscal framework.

Answer 151

It shows that expansionary fiscal policy must be credible and supported by institutions to avoid destabilising markets.

Answer 152

Critics argued her approach underestimated demand-side effects and inflationary risks, and overestimated the growth impact of tax cuts.

Answer 153

The Bank of England was raising rates to combat inflation while the government was injecting a large fiscal stimulus.

Answer 154

Truss drew from free-market economics and Reaganomics, favouring lower taxes and deregulation.

Answer 155

Truss’s agenda marked a shift towards high-risk, debt-financed stimulus focused on rapid growth.

Answer 156

Fiscal credibility, institutional trust, and coordination with monetary policy are vital for market stability.

Answer 157

The crisis was triggered by the collapse of the US subprime mortgage market.

Answer 158

Financial markets were interconnected, leading to a global liquidity crunch when confidence collapsed.

Answer 159

The UK entered a deep recession, with GDP shrinking by over 6% from peak to trough.

Answer 160

It slashed interest rates to historic lows and launched quantitative easing.

Answer 161

The government increased spending to stabilise the economy and bailed out major banks.

Answer 162

Productivity growth stagnated, with many economists believing the crisis caused 'scarring'.

Answer 163

It led to major reforms including higher capital requirements and more oversight of systemic risks.

Answer 164

A credit crunch occurs when banks sharply reduce lending due to fears about borrowers’ solvency.

Answer 165

Unemployment rose significantly, peaking at around 8% in the UK in 2011.

Answer 166

Financial markets are prone to failure, and proactive regulation is crucial during downturns.

Answer 167

QE is a form of unconventional monetary policy where a central bank buys long-term government bonds to inject money into the economy.

Answer 168

With interest rates close to zero, QE was used to support spending and investment.

Answer 169

QE raises demand for bonds, pushing up prices and lowering yields, which reduces borrowing costs.

Answer 170

The main channels are lower long-term interest rates, higher asset prices, and increased bank lending.

Answer 171

Inflation effects were limited in most advanced economies, including the UK.

Answer 172

QE creates central bank reserves and is reversible, while 'printing money' often implies permanent monetary expansion.

Answer 173

The Bank of England bought over £875 billion in UK government bonds and some corporate bonds.

Answer 174

Critics argue QE inflated asset prices and distorted financial markets.

Answer 175

QE can lead to currency depreciation, boosting exports but also importing inflation.

Answer 176

QE is more effective in crisis periods; its impact may be modest in normal conditions.

Answer 177

By purchasing government bonds, QE lowers yields, reducing the cost of government borrowing.

Answer 178

Reversing QE is called quantitative tightening (QT), involving the central bank reducing its balance sheet.

Answer 179

QE increases bank reserves, but this doesn’t automatically increase lending.

Answer 180

Evidence suggests QE helped avoid a deeper recession, but its impact on real GDP growth was modest.

Answer 181

QE boosts asset prices, benefiting wealthier households and widening wealth gaps.

Answer 182

Fiscal dominance occurs when monetary policy is constrained by the need to support government borrowing.

Answer 183

Expectations are crucial; if firms believe QE will succeed, they’re more likely to invest.

Answer 184

QE involves actual asset purchases, while forward guidance is a communication tool about future interest rates.

Answer 185

Lower interest rates reduce returns on annuities and fixed-income investments.

Answer 186

QE supports inflation targeting when interest rates are at the lower bound, aiming to keep inflation close to the 2% target.

Answer 187

It refers to the growing gap in output per worker between different geographic areas within a country.

Answer 188

It limits national growth potential and can lead to inequality and political discontent.

Answer 189

Poor transport infrastructure, underinvestment in skills, and weak innovation outside core cities are key contributors.

Answer 190

In high-productivity regions, businesses benefit from dense networks and knowledge spillovers.

Answer 191

Efficient transport links reduce travel time and boost business connectivity.

Answer 192

Regions with lower educational attainment struggle to attract high-productivity firms.

Answer 193

Yes, targeted public investment and support for local skills can help stimulate lagging regions.

Answer 194

It's the UK government's initiative aimed at reducing regional inequalities.

Answer 195

High housing costs in productive regions can deter in-migration, limiting labour market flexibility.

Answer 196

Convergence in output per hour across regions and improved local innovation ecosystems would signal success.

Answer 197

An ageing population reduces the labour force participation rate and increases dependency ratios.

Answer 198

Older workers may have lower adaptability to new technologies, though experience can offset this.

Answer 199

Lower birth rates shrink the future labour force, limiting long-run growth.

Answer 200

Yes, younger migrants can boost labour supply and support tax revenues.

Answer 201

Investing in education and upskilling can raise average productivity to offset demographic slowdown.

Answer 202

Public spending on pensions and health increases, while tax revenue growth may slow.

Answer 203

Policies to support older workers and childcare support can boost participation.

Answer 204

No, rural areas tend to have older populations while cities attract younger workers.

Answer 205

Measures like paid parental leave may encourage higher birth rates.

Answer 206

A mix of policies: raise productivity, boost labour force participation, and manage immigration effectively.

Answer 207

TFP measures the efficiency with which labour and capital are used together to produce output.

Answer 208

The UK has seen weak investment and low diffusion of innovation beyond frontier firms.

Answer 209

TFP measures the efficiency with which labour and capital are used together to produce output. It captures improvements in technology, innovation, management, and institutions beyond inputs alone.

Answer 210

The UK has seen weak investment, low diffusion of innovation beyond frontier firms, reduced competition in some sectors, and uncertainty post-financial crisis and Brexit—all of which dampen TFP.

Answer 211

Long-run growth depends heavily on TFP improvements. While capital deepening boosts growth temporarily, only TFP can sustain growth without continual increases in input use.

Answer 212

Through investment in R&D, support for firm innovation, improved education and skills, better infrastructure, regulatory reform, and competition policy to encourage productive dynamism.

Answer 213

It refers to the stagnation in labour productivity post-2008, where output per hour grew far more slowly than expected despite relatively high employment—partly due to low TFP growth.

Answer 214

TFP rises when new technologies spread from frontier to laggard firms. Barriers include skills gaps, lack of investment, and poor management practices in less productive firms.

Answer 215

It's calculated as the residual from a production function after accounting for labour and capital. It’s sensitive to measurement errors and assumptions about returns to scale and input quality.

Answer 216

Yes—if growth is driven by increases in labour or capital inputs. However, this is not sustainable without TFP gains, as diminishing returns eventually set in.

Answer 217

Some sectors (like IT) experience rapid innovation, while others (like care or hospitality) are labour-intensive with limited scope for automation, keeping productivity low.

Answer 218

Very. Studies show large gaps in productivity between firms due to management practices. Improving decision-making, incentives, and operational efficiency can significantly raise TFP.

Answer 219

Allocative efficiency occurs when resources are distributed in a way that maximises welfare—i.e. goods and services are produced according to consumer preferences. Even if productivity is high, a misallocation reduces economic efficiency.

Answer 220

When workers’ skills don’t align with job requirements, it leads to lower output per worker. This mismatch also reduces innovation diffusion and limits the productivity potential of firms and sectors.

Answer 221

Frontier firms lead in adopting innovations, processes, and technologies, while laggards fall behind. The gap reflects how poorly knowledge and efficiency gains are shared, especially in the UK, where diffusion is weak.

Answer 222

Capital shallowing refers to a decline in capital per worker, often due to underinvestment. It leads to stagnating labour productivity, as each worker has less access to productivity-enhancing tools.

Answer 223

Healthy competition forces firms to innovate and improve efficiency. If market power increases (e.g. monopolies), firms may underinvest in productivity improvements, knowing they face little threat from rivals.

Answer 224

Yes. Excessive or poorly designed regulations can impose high compliance costs, discourage innovation, and reduce entry and exit in markets—slowing down reallocation and dynamism essential to productivity.

Answer 225

X-inefficiency occurs when firms are not operating at maximum efficiency due to lack of competitive pressure or poor internal organisation—leading to lower output for a given set of inputs.

Answer 226

Access to finance enables firms to invest in capital, training, and innovation. Credit constraints especially hurt SMEs, delaying investment in productivity-enhancing activities and technology.

Answer 227

It refers to the movement of resources (e.g. labour and capital) from less productive to more productive firms or sectors. Inflexible labour markets, barriers to entry/exit, or policy distortions can inhibit this process.

Answer 228

Smaller firms often face resource constraints, have limited management capacity, and may not benefit from economies of scale. However, they can still be innovative—policy support needs to target high-growth potential SMEs.

Answer 229

Intangible capital includes non-physical assets like software, data, branding, design, R&D, and organisational knowledge. It’s increasingly important in modern economies where services and digital firms dominate.

Answer 230

Intangible investment enhances firm capabilities and innovation. For example, R&D leads to new products, and software improves efficiency. These raise total factor productivity (TFP), a key driver of long-run growth.

Answer 231

Many intangibles (like internal training or organisational processes) aren’t recorded in national accounts or firm balance sheets, so their value is often underestimated in GDP and productivity data.

Answer 232

The UK performs well in some areas (e.g. design, finance-related intangibles) but lags in others like R&D and management quality compared to the US. This affects innovation diffusion and productivity.

Answer 233

Tax incentives for R&D, better access to growth finance, skills development, and support for data infrastructure can boost intangible investment. Institutions like the British Business Bank can help SMEs scale.

Answer 234

Actually, many intangibles are highly scalable (e.g. software can be used by millions at low marginal cost), but they often require complementary assets (like skilled labour or strong IP regimes) to be effective.

Answer 235

Intangible-rich firms typically have higher productivity, innovation, and growth potential. They invest in knowledge assets and can scale rapidly. Intangible-poor firms struggle to compete in modern, digital economies.

Answer 236

Potentially. Digital tools and knowledge assets can allow firms in remote areas to compete globally. But this depends on infrastructure (e.g. broadband), skills, and support for innovation outside urban hubs.

Answer 237

Strong IP protection, legal frameworks, data standards, and innovation ecosystems are essential for intangible capital to flourish. Without institutional support, returns on intangible investment may be too uncertain.

Answer 238

Endogenous growth theory highlights how knowledge accumulation and innovation (key intangibles) drive long-term growth. Intangibles have increasing returns and spillovers, reinforcing the importance of policy support.

Answer 239

Human capital refers to the skills, knowledge, and health that individuals possess, which contribute to their productivity. It's built through education, training, and experience.

Answer 240

Education raises labour productivity by improving skills. It also boosts innovation, enables adoption of new technologies, and supports occupational mobility—key drivers of sustained economic growth.

Answer 241

General human capital (e.g. literacy, numeracy) is transferable across jobs. Specific human capital is job- or firm-specific (e.g. software systems training). General human capital tends to have wider economic benefits.

Answer 242

Common metrics include years of schooling, educational attainment levels, cognitive test scores, and skill-adjusted labour input. However, these may not fully capture on-the-job learning or soft skills.

Answer 243

Higher human capital raises productivity by improving decision-making, problem-solving, and the effective use of technology. It also complements physical and intangible capital, amplifying their impact.

Answer 244

Returns depend on education quality, labour market conditions, and whether skills match employer needs. Mismatches can reduce wage returns and weaken the link between education and growth.

Answer 245

Improving quality and accessibility of schooling, expanding vocational training, and aligning curricula with employer needs can build a skilled workforce and boost national productivity.

Answer 246

Early education supports cognitive and social development, improving long-term outcomes. Studies show high returns to early intervention, especially for disadvantaged children, via improved attainment and later productivity.

Answer 247

In a fast-changing economy, adult education and upskilling are vital to maintain employability and productivity. Lifelong learning supports adaptability, innovation, and inclusive growth.

Answer 248

If labour demand doesn’t match the supply of skills, returns may be low. Education must be accompanied by job creation, innovation, and infrastructure to realise full growth benefits.

Answer 249

It refers to the growing divergence between labour productivity and median real wages. While productivity has risen over time, wage growth—especially for lower earners—has lagged behind.

Answer 250

Explanations include a declining labour share of income, weakened union power, globalisation pressures, automation replacing mid-wage jobs, and monopsony power limiting wage bargaining.

Answer 251

If a smaller share of output goes to workers, even rising productivity may not translate into wage growth. This can occur if capital captures more of the gains from growth.

Answer 252

Employers with monopsony power (few firms hiring) can suppress wages below worker productivity. This weakens the link between pay and productivity, especially in concentrated labour markets.

Answer 253

Automation can raise productivity but replace middle-income jobs, polarising the wage distribution. It may increase returns to high-skilled labour while reducing demand for routine work.

Answer 254

High-productivity gains in capital-intensive sectors (e.g. finance, tech) may not lift pay broadly if most workers are in lower-productivity sectors like care or hospitality.

Answer 255

Inclusive growth ensures productivity gains are widely shared. Addressing the pay-productivity gap is crucial to reduce inequality and ensure the benefits of growth reach more people.

Answer 256

If workers are in roles below their skill level or working fewer hours than desired, aggregate productivity may rise while individual wages remain depressed.

Answer 257

Measures include stronger collective bargaining, minimum wage rises, skills development, encouraging high-value sectors, and corporate governance reform to link pay more to firm performance.

Answer 258

It can erode living standards, reduce public support for growth-focused policies, and fuel inequality. If workers don’t feel they benefit from growth, it weakens social cohesion and trust.

Answer 259

Frontier firms are the most productive and innovative in the economy, typically global leaders. Lagging firms are less productive and slower to adopt new technologies or practices.

Answer 260

Digital technologies are often scale-biased, benefiting frontier firms more. Lagging firms may lack the skills, capital, or incentives to adopt them. Weak competition and barriers to diffusion also play a role.

Answer 261

If productivity growth is concentrated in a small set of firms, the broader economy may not experience strong productivity gains. This dampens average productivity and limits wage growth.

Answer 262

Productivity gains at the top need to spread via knowledge transfer, competition, and worker mobility. Weak diffusion limits the benefits of innovation and reinforces productivity divergence.

Answer 263

Studies show that frontier firms often have superior management. Lagging firms may struggle with poor practices, weak incentives, and low adoption of data-driven decision-making.

Answer 264

Barriers include limited access to finance, skills shortages, lack of awareness of new technologies, and risk aversion. Regulation and market structure can also entrench inefficiencies.

Answer 265

Older and smaller firms often lag behind in productivity. Younger, high-growth firms (scale-ups) tend to be more dynamic, but may face challenges scaling up without the right ecosystem.

Answer 266

Yes. Stronger competition can encourage lagging firms to innovate or exit, reallocating resources to more productive uses. It also prevents frontier firms from abusing market power.

Answer 267

Support for technology adoption, training, and digital infrastructure can help lagging firms upgrade. Targeted support needs to avoid propping up unviable firms and focus on capability-building.

Answer 268

If only workers in frontier firms see wage and career growth, it increases inequality. Addressing the gap supports more inclusive economic growth and a healthier business ecosystem.

Answer 269

The UK has persistent weaknesses in investment, skills, infrastructure, and management practices. Regional disparities and institutional inefficiencies also constrain productivity.

Answer 270

The UK has historically underinvested in physical and digital infrastructure, R&D, and machinery. This limits capital deepening and slows technological diffusion across firms.

Answer 271

Mismatches between employer needs and workforce skills reduce labour productivity. This is especially acute in sectors like manufacturing, construction, and tech.

Answer 272

Uncertainty (e.g. Brexit, COVID, policy volatility), low expected returns, and short-termism in corporate governance reduce incentives for long-term investment.

Answer 273

Concentration of high-productivity activity in London and the South East limits the full utilisation of national talent and infrastructure, lowering aggregate growth potential.

Answer 274

High housing costs and constrained supply restrict geographic mobility. This prevents workers from moving to high-productivity areas, limiting allocative efficiency.

Answer 275

Complex and slow planning systems, fragmented industrial policy, and inconsistent skills funding reduce the effectiveness of growth-enhancing initiatives.

Answer 276

Poor connectivity, especially in the North and rural areas, limits access to jobs, markets, and innovation hubs, holding back regional economic integration.

Answer 277

SMEs often struggle to access finance to grow or invest in productivity-enhancing technologies, especially outside London, leading to underperformance.

Answer 278

Complex, volatile tax systems and capital allowances may distort investment decisions. Inconsistent incentives can deter long-term, productivity-boosting investments.

Answer 279

Complex, volatile tax systems and capital allowances may distort investment decisions. Inconsistent incentives can deter long-term, productivity-boosting investment.

Answer 280

As economies shift towards services and intangibles, outputs become harder to quantify. Many services (e.g. education, health) lack clear market prices, complicating GDP measurement.

Answer 281

Free digital services like Google or Wikipedia provide value not captured in GDP. This underestimates output and productivity growth, especially in tech-heavy economies.

Answer 282

Outputs like healthcare quality or policing effectiveness are hard to define and quantify. Often, inputs are used as proxies, which may obscure true productivity changes.

Answer 283

GDP may not fully account for rising quality (e.g. smartphones becoming more powerful for the same price), which means real output and productivity may be understated.

Answer 284

It ignores differences in labour intensity, part-time work, and underemployment. Two economies with similar GDP/hour may have very different working patterns and output structures.

Answer 285

Unrecorded activity (cash-in-hand jobs, home production) isn't captured in official statistics, especially in lower-income or gig economy contexts. This leads to underestimates of true output.

Answer 286

Many innovations create consumer surplus or disrupt existing sectors without raising measured GDP much (e.g. better logistics or platform services). This masks underlying dynamism.

Answer 287

High-productivity firms can be offset by a long tail of lagging firms. Aggregates may hide important dispersion and misrepresent the overall innovation landscape.

Answer 288

Technological change may take years to translate into measured productivity. Early stages of adoption involve costs or learning curves, delaying visible gains in data.

Answer 289

Different statistical methods, price indices, and sector compositions make it hard to compare accurately. Purchasing Power Parity (PPP) helps but doesn't eliminate all bias.

Answer 290

Productivity is typically output per hour worked, so inefficient use of time (e.g. long meetings, admin tasks) reduces measured productivity even if total output is unchanged.

Answer 291

Knowledge work often produces intangible outputs (e.g. ideas, analysis) with unclear links to time spent. Output is hard to quantify, so time use doesn’t translate neatly into productivity.

Answer 292

Flexibility may increase productivity by reducing commuting time and allowing workers to optimise their schedules. But it can also blur work-life boundaries, leading to burnout or inefficiencies.

Answer 293

Multitasking can reduce focus and quality, lowering effective productivity. Time spent switching tasks may not contribute directly to output, distorting measured efficiency.

Answer 294

Time spent on unpaid care, housework, or volunteering isn’t captured in GDP or productivity figures, despite contributing to overall societal welfare and output.

Answer 295

Strategic breaks can improve focus and prevent fatigue, boosting per-hour output. Ignoring rest periods in time-use analysis risks underestimating their value to productivity.

Answer 296

It can cut unproductive time (e.g. commuting), but may introduce distractions or communication delays. The net effect depends on job type, individual habits, and management.

Answer 297

More hours do not always mean more output. Diminishing returns set in, so productivity per hour may fall if people work too long without rest.

Answer 298

Understanding how people allocate time (e.g. care work, commuting, leisure) helps policymakers design interventions that support well-being and labour market efficiency.

Answer 299

As services and hybrid work become more common, traditional output measures may miss key dynamics. Time-use data offers insight into where inefficiencies or improvements could lie.

Answer 300

AI can boost productivity by automating routine tasks, enhancing decision-making, and enabling new products. However, adoption lags, costs, and skills mismatches may delay large-scale gains.

Answer 301

Despite high investment, measured productivity may not rise immediately due to implementation delays, adjustment costs, or mismeasurement of AI’s intangible benefits.

Answer 302

AI may displace some jobs while augmenting others. Productivity rises if AI complements human work effectively, but disruption or skills gaps may slow the transition.

Answer 303

Frontier firms with resources to adopt AI may leap ahead, while lagging firms struggle. This divergence could exacerbate inequality and reduce overall productivity diffusion.

Answer 304

AI-driven improvements (e.g. better search, automated tasks) may not be fully reflected in GDP or output metrics, making it hard to capture real productivity gains.

Answer 305

If AI replaces jobs without increasing output significantly, measured output per worker may rise, but this could mask underemployment or quality issues.

Answer 306

Invest in digital infrastructure, education, and regulation to ensure AI is used inclusively and efficiently. Focus on retraining and diffusion beyond leading firms.

Answer 307

AI’s benefits rely on complementary investments in data, software, and organisational change. Without these, productivity gains from AI may not materialise.

Answer 308

AI could streamline administrative tasks, improve forecasting, and enhance service delivery, but also raises challenges around ethics, data quality, and user trust.

Answer 309

It might help, especially in services and public administration, but barriers like low investment, regional disparities, and poor diffusion need addressing to unlock its full impact.

Answer 310

Not directly. While crypto infrastructure (like blockchain) may improve efficiency in finance and logistics, most crypto trading is speculative and doesn't boost real productivity.

Answer 311

Blockchain can enhance productivity by reducing transaction costs, increasing transparency, and enabling faster contract enforcement in sectors like supply chains and finance.

Answer 312

No, in economic terms. Unlike capital investment in machinery or skills, most crypto assets don’t generate productive output, so they have limited impact on long-term growth.

Answer 313

Yes. High volatility and speculative bubbles can create financial instability. Widespread adoption without regulation could disrupt monetary policy and tax systems.

Answer 314

If blockchain tech improves how existing inputs are used (e.g. faster settlements, better data), it could raise TFP. But most current crypto use doesn’t achieve this.

Answer 315

Potentially, especially for international payments. But volatility, energy use, and slow processing times in some blockchains limit their current efficiency benefits.

Answer 316

Investment in education, infrastructure, or digitalisation yields clearer productivity benefits. Crypto speculation doesn’t enhance output or skills, so the productivity case is weaker.

Answer 317

Yes, by making payments faster and cheaper, reducing costs in the financial system. But design and implementation matter—poorly designed CBDCs could crowd out private finance.

Answer 318

Mining uses vast energy and computing resources without producing output beyond coins. This diverts resources from more productive sectors, potentially reducing net productivity.

Answer 319

Possibly, by increasing access to finance or reducing remittance costs. But challenges like digital infrastructure, regulation, and consumer protection must be addressed.

Answer 320

Growth can raise average incomes, but the distribution of gains matters. If growth is concentrated among higher earners, inequality may worsen.

Answer 321

It's the idea that policies aiming to reduce inequality (equity) may reduce incentives to work, invest, or innovate (efficiency).

Answer 322

High inequality can reduce growth by limiting access to education, stifling demand, and increasing social unrest.

Answer 323

Growth that is broad-based across sectors and populations, ensuring that the benefits of rising GDP are widely shared.

Answer 324

If the bottom of the income distribution sees absolute gains but the top gains much more, poverty can fall while inequality rises.

Answer 325

Vertical equity is the idea that people with higher incomes should pay more tax or contribute more. Horizontal equity is about treating similar individuals equally.

Answer 326

Education improves social mobility and productivity, making it a key lever for inclusive growth.

Answer 327

Lower-income households tend to spend a higher share of their income. If more income flows to the top, aggregate consumption may fall.

Answer 328

If wealth and opportunity are concentrated within families, talent and potential may be wasted.

Answer 329

Policies that enhance productive capacity and reduce barriers — like early years investment, universal healthcare, skills training, childcare support, and infrastructure in deprived areas.

Answer 330

Finance, ICT (Information and Communications Technology), and professional services tend to have the highest productivity levels due to capital intensity, high-skilled labour, and economies of scale.

Answer 331

Sectors like hospitality, retail, and social care face low productivity due to labour intensity, limited scope for automation, low capital investment, and low wages.

Answer 332

Manufacturing benefits from greater capital intensity, standardisation, and technological adoption. Services have limited scope for scale or automation.

Answer 333

The UK construction sector suffers from fragmented supply chains, low adoption of digital tools, poor project management, and variable workforce skills.

Answer 334

ICT boosts productivity through automation, data use, and improved communication. It’s transformed sectors like finance, logistics, and retail.

Answer 335

Healthcare is a large public sector employer with complex output measurement. Productivity is harder to define because quality matters.

Answer 336

Firm-level differences in management, skills, innovation, and technology adoption create large within-sector productivity gaps.

Answer 337

Sectors concentrated in London and the South East benefit from agglomeration effects and higher skills.

Answer 338

Measuring education output is complex — quantity (hours taught) and quality (learning outcomes) both matter.

Answer 339

Digitising construction, improving public sector performance via better data use, scaling successful tech adoption in retail and logistics, and boosting skills and management in lagging SMEs.

Answer 340

It showed capital accumulation drives early growth, but long-term growth relies on exogenous technological progress. It highlighted diminishing returns to capital.

Answer 341

It internalises technological progress, linking it to factors like R&D and human capital. Unlike Solow, it explains how policy can affect long-run growth.

Answer 342

They assume convergence without explaining persistent divergence across countries. Endogenous models address this.

Answer 343

It emphasised savings and investment in driving growth, foundational for early development economics but too simplistic in assumptions.

Answer 344

It stresses the role of legal systems, property rights, and governance in sustaining investment and innovation.

Answer 345

Yes. Norms around trust, hard work, and long-termism affect entrepreneurship, investment, and productivity.

Answer 346

High risk aversion may suppress entrepreneurship and innovation, leading to slower growth.

Answer 347

It’s a cultural trait where societies prioritise future outcomes. It supports education, R&D, and infrastructure investment.

Answer 348

Loss aversion and status quo bias make firms and workers reluctant to adopt new technologies despite efficiency gains.

Answer 349

Yes, valuing education fosters human capital accumulation and innovation—core drivers of long-run growth.

Answer 350

Firms may lack capital, skills, or incentives to implement new tech. Institutional and cultural barriers can slow diffusion.

Answer 351

Good management ensures efficient integration of tech. UK’s weak management in some sectors slows productivity.

Answer 352

Benefits are uneven, adoption is slow, and output measures may not fully capture value created.

Answer 353

Tech clusters tend to emerge in high-skill regions, leaving lagging areas with lower adoption and stagnating productivity.

Answer 354

High-skilled labour complements tech adoption. Skills gaps act as a bottleneck for productivity-enhancing innovation.

Answer 355

It excludes unpaid work (like childcare), environmental degradation, and wellbeing-related factors.

Answer 356

It factors in health, education, environment, and subjective wellbeing alongside GDP to assess progress.

Answer 357

It contributes to social welfare and economic stability, even if not monetised.

Answer 358

It measures quantity not quality of growth, and ignores distributional outcomes or sustainability.

Answer 359

Supplementary metrics (like unpaid work or natural capital) designed to complement GDP.

Answer 360

Free services (like Google) create consumer surplus that GDP doesn’t capture.

Answer 361

Despite digital innovation, measured productivity has stagnated—possibly due to measurement lags or misallocation.

Answer 362

Many intangibles (like software, brand value) are hard to value, causing underreporting.

Answer 363

Zero-priced products, network effects, and data-driven business models distort traditional output indicators.

Answer 364

Platforms scale quickly, benefiting frontier firms while others lag behind—widening productivity dispersion.

Answer 365

Endogenous growth theory posits that growth is primarily driven by internal factors, particularly investment in human capital, innovation, and knowledge spillovers.

Answer 366

Spillovers occur when the benefits of an activity, like innovation, extend beyond the firm or individual undertaking it.

Answer 367

Tax incentives for R&D or capital investment can stimulate innovation and firm efficiency.

Answer 368

Capital deepening refers to increases in capital per worker, boosting labour productivity.

Answer 369

Trade promotes specialisation, technology diffusion, and competitive pressure.

Answer 370

While automation boosts efficiency, it may lead to job displacement and reduce aggregate demand.

Answer 371

Agglomeration occurs when firms and workers cluster geographically, leading to productivity gains.

Answer 372

A dynamic economy with high firm entry and exit can reallocate resources toward more productive firms.

Answer 373

Excessive or poorly designed regulation may stifle innovation, while clear rules can enhance productivity.

Answer 374

Entrepreneurs drive innovation, create new markets, and increase competitive pressure.

Answer 375

GDP doesn’t account for inequality, environmental degradation, or non-market activities.

Answer 376

Excessive inequality can reduce aggregate demand and limit investment in human capital.

Answer 377

Rent-seeking occurs when individuals or firms gain income through manipulation rather than value creation.

Answer 378

If workers lack the skills demanded by firms, productivity suffers.

Answer 379

Growth accounting breaks GDP growth into contributions from labour, capital, and total factor productivity.

Answer 380

Intensive growth comes from higher productivity per unit of input; extensive growth results from using more inputs.

Answer 381

If inflation is underestimated, real GDP growth appears stronger than it is.

Answer 382

Competitive pressure forces firms to innovate and use resources efficiently.

Answer 383

Good infrastructure reduces transaction costs and improves connectivity.

Answer 384

Zombie firms are unproductive businesses kept alive through cheap credit, dragging down productivity.

Answer 385

Growth is faster when capital flows to its most productive uses.

Answer 386

It’s the portion of output growth not explained by changes in capital or labour.

Answer 387

Ageing populations may reduce labour supply and increase dependency ratios.

Answer 388

Convergence suggests poorer countries will grow faster than richer ones by adopting existing technology.

Answer 389

Firms with strong management practices tend to allocate resources more effectively.

Answer 390

The tariffs, especially on Chinese imports, aimed to reduce the US trade deficit, protect domestic industries, and address alleged unfair trade practices.

Answer 391

Tariffs raise the cost of imported goods, leading to higher prices and potential welfare losses.

Answer 392

A trade war is when countries impose tariffs or other trade barriers against each other in retaliation.

Answer 393

Some protected industries saw temporary job gains, but many downstream manufacturers faced higher input costs.

Answer 394

Tariffs distort prices and reduce trade efficiency, leading to welfare losses.

Answer 395

No. Despite the tariffs, the overall US trade deficit widened.

Answer 396

Trade diversion occurs when tariffs shift imports from a targeted country to others.

Answer 397

China retaliated with tariffs on US goods, especially agricultural products.

Answer 398

Sustained protectionism can reduce competitive pressure, discourage innovation, and slow productivity growth.

Answer 399

Yes. The tariffs created uncertainty in global markets and disrupted supply chains.

Answer 400

They created short-term growth in protected sectors but imposed costs on downstream industries.

Answer 401

Tariffs reduce net exports, dampen investment due to uncertainty, and reduce consumption via higher prices.

Answer 402

Policy uncertainty and higher input costs discouraged capital investment.

Answer 403

They disrupted global trade flows and supply chains, contributing to a slowdown in global trade growth.

Answer 404

Retaliatory tariffs shrink export markets and raise domestic costs, reducing firm profits.

Answer 405

Yes — by reducing openness and competition, they risk slower productivity growth.

Answer 406

Indirectly. They reduced competitive pressure and increased input costs for many firms.

Answer 407

Many EMs suffered from reduced global demand and supply chain re-routing.

Answer 408

Uncertainty delays investment and hiring, especially in trade-exposed sectors.

Answer 409

Tariffs can reduce TFP by encouraging firms to substitute towards less efficient domestic inputs.

Answer 410

If the financial sector misallocates capital, this distorts investment, reducing overall productivity.

Answer 411

Manufacturing often sees faster productivity growth due to scale, while services are more labour-intensive.

Answer 412

Output in healthcare is hard to measure—it's not just about volume but quality-adjusted outcomes.

Answer 413

Drivers include digitalisation, skill upgrading, and efficient business processes.

Answer 414

Better transport reduces time and cost for moving people and goods, increasing effective labour supply.

Answer 415

Well-designed innovation policy supports R&D and can enhance long-term economic growth.

Answer 416

Drivers include digitalisation, skill upgrading, and efficient business processes. Cloud computing, AI, and data analytics help reduce time on repetitive tasks, allowing for higher-value advisory and creative work.

Answer 417

Better transport reduces time and cost for moving people and goods, increasing effective labour supply, enabling agglomeration, and improving access to jobs. This raises both productivity and employment potential across regions.

Answer 418

Well-designed innovation policy (R&D tax credits, university spin-out support, tech clusters) boosts knowledge creation and diffusion. These innovations raise TFP, improve competitiveness, and sustain long-term economic growth.

Answer 419

Overly restrictive regulation may stifle innovation and market entry. But smart regulation (e.g., sandbox environments for fintech) can promote competition and reduce uncertainty, encouraging investment and experimentation.

Answer 420

When workers' skills don’t match job requirements, firms can’t operate at full efficiency. This lowers output per hour and limits technology adoption, especially in sectors with high digital requirements.

Answer 421

High fixed costs from business rates can discourage expansion or investment in premises. If poorly targeted, they distort firm location choices and penalise capital-intensive or growing businesses, dampening productivity.

Answer 422

Growth driven by consumption may lack durability if not underpinned by productivity gains. It risks inflation, external imbalances, and weak investment. Long-term growth is more sustainable when built on productivity and exports.

Answer 423

When the government borrows heavily, it can push up interest rates, making it more expensive for private firms to borrow and invest. This can reduce private sector investment, particularly in capital-intensive sectors, limiting long-term growth potential.

Answer 424

Yes, if the returns on public investment (e.g. infrastructure) are higher than the cost of borrowing, it can raise productivity and crowd in private investment by reducing costs (e.g. better transport, faster logistics).

Answer 425

When interest rates are near zero and private demand is weak, government borrowing may not raise rates. In fact, it can stimulate demand and encourage investment, supporting growth.

Answer 426

If borrowing is used for productive investment (like R&D, transport, or education), it boosts the economy’s productive capacity, increasing potential output and long-run growth.

Answer 427

During periods of full employment or tight monetary policy, where government borrowing competes with private sector demand for funds, driving up interest rates.

Answer 428

Growth accounting breaks GDP growth into components: labour input, capital input, and total factor productivity (TFP), which captures efficiency gains or technological progress.

Answer 429

TFP represents the portion of growth not explained by capital or labour. It reflects improvements in efficiency, innovation, and institutional quality. Sustained growth needs strong TFP.

Answer 430

The UK’s slowdown since 2008 reflects weak TFP growth, stagnant real wages, and low investment, suggesting efficiency and innovation are key bottlenecks.

Answer 431

Higher education and training improve labour quality, which can either be captured in TFP or as a quality-adjusted labour input in decompositions.

Answer 432

TFP is often a residual — it captures what’s left after accounting for labour and capital, so measurement errors or misattributions in inputs can distort it.

Answer 433

It refers to increasing capital per worker (e.g. more machines or better tools), which can raise output per worker, but only up to a point due to diminishing returns.

Answer 434

Because of diminishing marginal returns to capital. Beyond a certain point, each extra unit of capital adds less to output. Sustainable growth needs TFP improvement.

Answer 435

In the short term, more or better capital boosts labour productivity. For example, equipping workers with modern IT systems can raise output per hour.

Answer 436

Through investment incentives, stable macroeconomic policy, support for R&D, and improving education to enable effective use of capital.

Answer 437

Capital widening increases capital to match labour growth, keeping capital per worker constant. Deepening increases capital per worker, improving productivity.

Answer 438

It’s a strategy where external demand (exports) drives economic expansion. Often seen in East Asian economies, it can support productivity through scale and specialisation.

Answer 439

The UK faces trade frictions post-Brexit, a large services sector that’s harder to export, and limited industrial base compared to export-heavy economies.

Answer 440

It can lead to unsustainable debt, trade imbalances, and limited productivity growth if spending isn’t directed towards investment or innovation.

Answer 441

Exporting firms often face intense competition, driving innovation. Exposure to global markets incentivises efficiency and investment in skills and technology.

Answer 442

Potentially, if paired with industrial strategy, trade facilitation, and skills investment. But structural challenges and global conditions would also matter.

Answer 443

It’s when temporary shocks (like a recession) cause permanent damage to growth, such as through long-term unemployment or lost investment.

Answer 444

The crisis led to underinvestment, skill erosion from unemployment, and weak productivity, which lowered the long-run growth path in many economies.

Answer 445

Yes, active labour market policies, public investment, and education can restore lost capacity and raise the economy’s potential output.

Answer 446

Early policy choices (e.g. focus on services or manufacturing) shape the structure of the economy, locking in advantages or disadvantages over time.

Answer 447

Resilient economies recover faster from shocks, preserving productive capacity. This reduces scarring and supports more stable long-term growth.

Answer 448

Through policy design, regulation, public investment management, and efficient delivery of public services. A well-functioning civil service can remove barriers to growth, improve the business environment, and ensure resources are allocated effectively.

Answer 449

If civil servants work efficiently, public services like planning, health, and education improve. These have spillover effects on private sector productivity by reducing delays, improving human capital, and boosting investor confidence.

Answer 450

Siloed departments, legacy IT systems, risk-averse culture, complex bureaucracy, and slow decision-making processes can all hinder efficiency and innovation in public service delivery.

Answer 451

Automating repetitive tasks, improving data sharing, and streamlining processes reduces admin burdens, frees up staff time, and enables faster, evidence-based policymaking.

Answer 452

Reform can improve service quality, reduce waste, and enable better allocation of public resources. This builds trust in institutions and delivers more effective growth-oriented policies.

Answer 453

By designing and implementing targeted place-based policies, coordinating infrastructure investment, supporting local skills initiatives, and ensuring regional voices inform national strategy.

Answer 454

Civil service economists analyse data, evaluate policy impact, and design interventions that improve allocative efficiency, human capital, or innovation — all core to productivity growth.

Answer 455

Yes. Delays in infrastructure approvals, slow planning systems, inefficient legal processes, or poor education outcomes reduce economic efficiency and deter investment.

Answer 456

A risk-averse, overly hierarchical culture may prevent experimentation or rapid policy adjustment. A learning, collaborative culture can better adapt to emerging growth challenges.

Answer 457

Unlike in the private sector, outputs can be intangible or difficult to quantify (e.g. advice, regulation, casework). Output measures often rely on proxies, making assessment complex.

Answer 458

GES economists inform government decisions by applying economic theory and evidence. They analyse policies affecting productivity, labour markets, infrastructure, education, innovation, and regional development — all key drivers of growth.

Answer 459

They use models and data to understand trends in total factor productivity, sector performance, and skills gaps. Their insights guide investment decisions and policy reforms aimed at improving UK productivity.

Answer 460

Impartial analysis ensures that economic advice is evidence-based, not politically motivated. This supports better decision-making and builds trust in the civil service’s ability to guide growth policy effectively.

Answer 461

By defining the policy objective, identifying relevant indicators (e.g. GDP, employment, TFP), building a counterfactual, and using cost-benefit analysis to assess trade-offs and long-term impact.

Answer 462

It means delivering rigorous economic analysis under time pressure — for example, responding to ministerial requests or budget deadlines — while still ensuring accuracy and policy relevance.

Answer 463

GES members work across departments like HMT, BEIS, DfE, and DLUHC, enabling coordinated economic strategies on levelling up, green growth, digital transformation, and supply-side reforms.

Answer 464

Microeconomic tools help assess how individuals and firms respond to policy, allowing better targeting of interventions. This is key for designing effective, growth-enhancing policies with minimal distortion.

Answer 465

By analysing spatial disparities, GES economists can advise on investment allocation, transport connectivity, local skills policies, and place-based incentives to support lagging regions.

Answer 466

The GES values — integrity, impartiality, professionalism, and respect — ensure that economists provide trusted, objective advice on complex growth challenges facing the UK.

Answer 467

By examining the distributional impact of policies and proposing measures that address inequality while maintaining efficiency — ensuring growth benefits are broadly shared.

Answer 468

Through digital transformation, streamlined processes, and data-driven decision-making. Civil servants help design efficient public services, reducing waste and improving outputs per resource used.

Answer 469

Growth underpins tax revenues, living standards, and public service funding. The GES supports sustainable and inclusive growth by analysing productivity drivers, labour markets, and macroeconomic trends.

Answer 470

By identifying productivity gaps between regions and recommending place-based policies — such as targeted infrastructure investment, skills funding, and support for innovation in underperforming areas.

Answer 471

GES economists evaluate the effectiveness of recovery measures like furlough, business grants, and investment incentives. They advise on how to rebuild sustainably while boosting long-term productivity.

Answer 472

Through policy on tax, regulation, education, and infrastructure — all shaped by economic analysis. Clear, stable policies reduce uncertainty and support business investment in capital and skills.

Answer 473

They collaborate with policy, operational, and analytical teams (e.g. statisticians, social researchers) to ensure growth policies are feasible, evidence-based, and aligned with departmental goals.

Answer 474

It helps prioritise interventions with the highest returns — for example, comparing the long-term impact of early years education vs. tax incentives on human capital development.

Answer 475

Because many productivity policies — like skills training or infrastructure — have delayed effects. GES economists must assess dynamic impacts, externalities, and sustainability when advising ministers.

Answer 476

Impartiality and rigour ensure that growth strategies are based on sound evidence, not short-term political goals. This leads to more credible and stable policymaking environments.

Answer 477

It’s applied in real time, under pressure, and often with incomplete data. GES economists must balance theory with pragmatism, making complex trade-offs to support national welfare.

Answer 478

A strategy centred on “securonomics” — combining economic stability, industrial policy, and state-led investment to create sustained and inclusive growth.

Answer 479

Through targeted public investment in green energy, infrastructure, and skills. She advocates fiscal responsibility alongside a new National Wealth Fund to crowd in private investment.

Answer 480

A revived industrial strategy would target sectors like green tech, life sciences, and advanced manufacturing to boost productivity and regional development.

Answer 481

By offering policy certainty, planning reform, and stable public-private partnerships, aiming to reduce uncertainty that discourages long-term private sector investment.

Answer 482

Labour’s approach includes devolving more power to local and regional authorities to support place-based growth and tackle persistent productivity gaps.

Answer 483

Through proposed reforms to the apprenticeship levy, expansion of training opportunities, and a new “Skills England” body to better match training to local economic needs.

Answer 484

It’s central. The “Green Prosperity Plan” pledges to invest in clean energy and infrastructure, aiming to create jobs, reduce energy bills, and decarbonise growth.

Answer 485

It prioritises macroeconomic stability and resilience to shocks, believing growth depends on strong institutions, sound finances, and long-term policymaking.

Answer 486

Labour emphasises active government, public investment, and industrial policy, while Conservatives have generally prioritised deregulation, tax cuts, and private sector-led growth.

Answer 487

Fiscal constraints, global headwinds, and institutional capacity may limit ambition. Balancing short-term pressures with long-term investment will test the credibility of their strategy.

Answer 488