Economic Growth

Question 1

What does Economic Growth really mean?

Answer 1

An increase in real GDP - which means an increase in the value of national output/national expenditure.

Question 2

Why is Economic Growth an important government objective?

Answer 2

• Increased Living Standards
• Improved Tax Revenues
• Helps create new jobs

Question 3

What is Economic Growth caused by?

Answer 3

• Rising Aggregate demand

- An increase in productive capcity

Question 4

What is the Aggregate Demand equation?

Answer 4

AD=(C+I+G+X-M)

Aggregate Demand = Consumption + Invesment + Government Spending + Exports -(minus) Imports

Question 5

If there is an increase in aggregate demand (AD) and an increase in long run aggregate supply (LRAS) what does it lead to?

Answer 5

• An increase in real GDP

- Without causing inflation

Question 6

Example of Economic Growth. (Central Bank of England)

Answer 6

• If the Central Bank cut interest rates, this would provide an incentive for firms to invest (borrowing would now be cheaper).

Question 7

Example of Economic Growth. (Investment)

Answer 7

• With higher investment, more people will be employed, and there is a efficient use of raw materials.

Question 8

Example of Economic Growth. (Consumer Spending)

Answer 8

interest rates will encourage consumer spending due to lower borrowing costs and lower mortgage repayments. This will cause an additional rise in Aggregate Demand.

Question 9

What is a key factor that determines Economic Growth.

Answer 9

Productivity - is the output per worker

Question 10

How will a development of technology help workers?

Answer 10

Will mean workers can produce more

Question 11

What 3 Policies lead to Economic Growth?

Answer 11

• Supply Side Policies
• Fiscal Policy
• Monetary Policy