What’s economic growth?
The increase in the potential level of real output that the economy can produce over a period of time
What does the movement from C to A represent?
Short-run economic growth
What does going from A to B represent here?
Long-run economic growth
What does a movement across the trend line show?
Long-run economic growth
What is the primary cause of changes in the economic cycle?
fluctuations in aggregate demand
What are some benefits of economic growth?
- Increases standards of living
- Increases people’s welfare
- Increases people’s life expectancy
What is frictional unemployment?
As new products are developed, and demand and cost conditions change, firms demand more of some labour skills while the demand for other types of labour declinesº
What is “structural unemployment”?
- Unemployment that results from the structural decline of industries which are unable to compete or adapt in the face of changing demand or new products
- May also be caused by changing skill requirements as industries change ways of producing their products
What is “cyclical unemployment”?
Unemployment occurring at the downturn of economic cycles
How can cyclical unemployment be reduced?
Through fiscal and/or monetary policy to stimulate aggregate demand
What is inflation?
Inflation is the continuous and persistent rise in the price level and fall in the value of money
What causes demand-pull inflation? Why?
- An increase in aggregate demand
- After a rightwards shift in AD, price levels have to rise to persuade firms to produce more output and meet the extra demand
What type of inflation is this?
Demand-pull inflation
What type of inflation is this?
Cost-push inflation
What are the components of Aggregate demand?
C + I + G + ( X - M )
What causes cost-push inflation?
A leftwards shift in short run AS, because rising costs of production lead to firms increasing their price
What’s the good part of inflation?
creeping inflation, which comes as a result of:
- growing markets
- healthy profits
- general climate of business optimism
is acting as a necessary side-effect of expansionary policies to reduce unemployment
What’s the difference between malign and benign deflation?
Benign ( good ) deflation results from a rightwards supply shift, whilst malign ( bad ) deflation results from a collapse ( leftwards shift ) of demand
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The Economic Methodology and the economic problem ( Micro )11
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Price determination in a competitive market ( Micro )11
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The market mechanism, market failure and government intervention in markets ( Micro )11
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Economic Performance ( Macro )18
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Financial Markets and Monetary Policy ( Macro )9
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Fiscal Policy an supply-side policies ( Macro )8
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Individual economic decision making ( Micro )5
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Individual economic decision making - Terms13
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Inflation and deflation ( Macro )8
