LS10 - Economic Growth

Question 1

Causes Of Short Run Economic Growth

Answer 1

AD increasing.

Increase in SRAS - Production costs decreasing.

Question 2

Causes Of Long Run Economic Growth

Answer 2

Increase In Quantity of FOP.
Improvement In Quality of FOP.
Increased Efficiency In Markets.

Question 3

Economic Efficiency

Answer 3

The way in which factors of production combine to produce goods and services

Question 4

What Factors Increase Economic Efficiency

Answer 4

Competition

Innovation

Question 5

Negative Output Gap

Answer 5

An economy is producing below their potential output and FOP isn’t being used, meaning there is spare capacity.

Question 6

Positive Output Gap

Answer 6

When actual output is more than full-capacity output, usually when demand is high and therefore factories operate above their efficiency capacity, making this unsustainable.

Question 7

Shocks

Answer 7

Large unexpected events that cause changes in real economic growth, inflation and unemployment.

Question 8

Demand-Side Shocks

Answer 8

A shock that affects one or more AD component e.g. unexpected tax cuts.

Question 9

Supply-Side Shocks

Answer 9

Shocks that affect short run AS and can affect long run AS e.g. natural disasters.

Question 10

Benefits Of Economic Growth

Answer 10

Lower levels of unemployment
Higher Living Standards
Increased Tax Revenue

Question 11

Costs Of Economic Growth

Answer 11

Pollution
Increased Inflation
Reduced Worker Satisfaction
Decreased Income Inequality
Unemployment