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Chapter 3.1 - Economic Growth (Costs of Economic Growth (Congestion…
Chapter 3.1 - Economic Growth
Keywords
GDP per capita
- GDP divided by the population
Gross Domestic Product
- The total valiue of goods and services produce in the country in a year
Economic Growth
- Growth in GDP over time
Economic Growth
This is the growth in the GDP of a country (the value of all goods and services produced within a country in a year)
The total value of output becomes incomes for those who produce it therefore value of total output is equal to total incomes of the people that produce it
When there it economic growth, both output and incomes are rising
Rate of Growth = Change in GDP/Original GDP * 100
What is GDP per Capita?
This is the GDP divided by the population (meaining it is the average income of the population)
Determinants of Economic Growth
Labour Productivity
This can be measured by output per worker per period of time. Higher productivity encourages economic growth
Size of Workforce
The econo,y can produce more if there is more labour. The bigger the labour force the more economic growth can occur
Education and Training
The more literate, educated, trained and skilled the workers, the higher the output of the country is likely to be
Natural Resources
If a country discovers or develops natural resources it can cause economic growth
Changes in Technology
Technological progress means quality of capital goods improves, and a given quantity of capital can now produce more output than before
Government Policies
Mixed Economies - Based on the market system of allocating resources, helps best achieve economic growth. Command economic growth (wheere state owns and allocated most of resources) tends to be most inefficent
Government investment in infrastructure - More investment leads to economic growth and infrastructure is the basic systems an economy uses to work effectively
Governments of mixed economies can take responsiblity for the macroeconomics management of the economy
Investment
This is spending on capital goods. More investment means that the economy has the ability to produce more goods and services in the future
Benefits of Economic Growth
Reduction in Poverty
As output and incomes rise, goverenments gets more taxes. They can use this to raise living standards of those in poverty.
Rise in welfare of employement
Because government gets more from taxes, more money gets spent on health and education services. If population is healthy it can lead to more economic growth in future
Rise in Material Living Standards
This means the average income rises. Increasing standard of living.
Rise in employment and Fall in unemployment
More workers are required to produce the extra output bought around by economic growth therefore there will be a rise in employment rates
Costs of Economic Growth
Congestion
Economic growth often concentrated in certain areas of the country which can cause those areas to become congested
Loss of non-renewable Resources
Natural resources are used in economic growth and those can't be replaced. If we are achieving economic growth now we will struggle in the future
Global Warming
Greater output achieved tends to lead to global warming which will have bad effects on evironment
Lower Quality of Life
Growth makes people materially better off, but could effect their health for the worse.People move from countryside to city where life is busier and stressful and they do less exercise,
Air Pollution
Rapid economic growth can cause a lot of air polution which can damage health
Inequalities of Income and Wealth
Not everyone benefits the same from economic growth. Benefit is very unevenly spread. Gap between rich a poor gets bigger
Environmental Costs
Production and consumption of goods and services can lead to more pollution
Inflation
A period of economic growth often leads to the price level rising. Occurs when total demand is rising but supply rising at slower rate than demand