topic 6

Question 1

what is potential economic growth?

Answer 1

happens when there is a increase in either the quantity or quality of a country’s factors of production of land, labour, capital and enterprise

Question 2

what is economic growth?

Answer 2

is the rate of growth of real GDP

Question 3

what is actual economic growth?

Answer 3

more of an economy resources are being used meaning output is increased and increases aggregate demand

Question 3

what is the business cycle?

Answer 3

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

Question 4

what is a recession?

Answer 4

occurs when GDP falls for two or more consecutive quarters

Question 5

what are the three indicators of a recession

Answer 5

1. a fall in real GDP
   2.rising unemployment
   3.contraction in consumer spending

Question 6

what is the output gap?

Answer 6

the output gap = actual output-potential output

difference between actual real GDP and potential real GDP

Question 7

what is productivity?

Answer 7

a measure of the efficiency of a factor of production

Question 8

what is labour productivity?

Answer 8

measure of output per worker, or per hour worked

Question 9

what is capital productivity?

Answer 9

a measure of output per unit of capital

Question 10

what is investment?

Answer 10

expenditure by firms on capital goods

Question 11

what is total factor productivity?

Answer 11

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

Question 12

what is depreciation?

Answer 12

is the fall in the value of physical capital equipment overtime as it is subject to wear and tear

Question 13

what is net investment?

Answer 13

gross investment minus depreciation

Question 14

what is human capital?

Answer 14

is the stock of skills and expertise that contribute to a workers productivity it can be increased through education and training

Question 15

what is the importance of economic growth?

Answer 15

1.improved material living standards
2.eases poverty and allows investment in human capital to improve standard of living
3.encourages investment
4.increases government tax revenue

Question 16

what are costs of economic growth?

Answer 16

1. External costs due to industrialisation
   2.depletion of non-renewable resources
2. stress on the labour force due to rapid technology changes
3. opportunity cost
4. balance of payments concerns due to MPM being high It will mean there’s lots of imports that causes current account deficit

Question 17

what is sustainable development?

Answer 17

development that meets the needs of the present without compromising the ability of future generations to meet their needs

Question 18

what is export led growth?

Answer 18

strategy to achieve rapid economic growth through the promotion of export led activity