Theme 2 - The UK economy - Performance and Policies (2.5 - Economic Growth) Flashcards
Define Actual Growth [1]
2.5.1 - Causes of Growth
An increase in Real GDP in an economy over time. [1]
Define Potential Growth [1]
Ref - 2.5.1 - Causes of Growth
An increase in the productive potential of an economy over time. [1]
What is the main factor which can increase actual economic growth? [1]
Give an example of this. [1]
Ref - 2.5.1 - Causes of Growth
An increase in any of the 4 factors in the AD identity. [1]
e.g. Higher consumption rates means there is more money flowing in an economy. [1]
What is the main factor which can cause potential economic growth? [1]
Give an example of this. [1]
Ref - 2.5.1 - Causes of Growth
Improvements in the quality of factors of production. [1]
e.g. Investing in more training for workers to increase their productivity. [1]
What is a positive output gap? [1]
2.5.2 - Output Gaps
When GDP is above the productive potential of an economy. [1]
What is a negative output gap? [1]
2.5.2 - Output Gaps
When GDP levels are below the productive potential of the economy. [1]
How can a positive output gap be achieved? [1]
2.5.2 - Output Gaps
Overworking factors of production for a limited time. [1]
How is a negative output gap achieved? [1]
2.5.2 - Output Gaps
High amounts of spare capacity and unemployment. [1]
What is the business cycle? [1]
2.5.3 - Business Cycle
A concept where GDP fluctuates, following a regular pattern. [1]
What does the business cycle show about actual GDP levels? [2]
2.5.3 - Business Cycle
Actual GDP will be in a positive output gap, [1] and it will also be in a negative output gap. [1]
Describe the general structure of a business cycle diagram. [2]
2.5.3 - Business Cycle
1 Straight line showing growth trend. [1]
1 fluctating line on the growth trend line. [1]
Define an economic boom. [1]
2.5.3 - Business Cycle
Actual GDP is aobe the productive potential rate of economic growth. [1]
Define what is meant by a recession. [1]
2.5.3 - Business Cycle
When GDP falls for 2 or more consecutive quarters. [1]
State 3 - 4 characteristics of an economic boom. [4]
2.5.3 - Business Cycle
- Low rates of unemployment. [1]
- High consumption and consumer confidence. [1]
- High animal spirits [1]
- Low levels of spare capacity. [1]
State 3-4 characteristics of a recession. [4]
2.5.3 - Business Cycle
- High rates of unemployment. [1]
- Low consumer confidence and higher saving. [1]
- Low animal spirits for firms. [1]
- High levels of spare capacity. [1]