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Chapter 10 Economic Growth (Factors (Structural factors (Political,…
Chapter 10 Economic Growth
Governments aim to achieve sustainable growth: Rate of growth that can be maintained in the long term without creating other significant economic problems for future generations. Implies +ve and stable growth over time
Inclusive growth: Economic growth that creates opportunity for all segments of the population and distributes the dividends of increased prosperity, both in monetary and non-monetary terms, fairly across society.
Measures
Intergrational Equity and Sustainability
Inclusion
Growth and Developement
Economic Growth: An increase in real national output of a country over a period of time.
Potential Growth: Rate of potential output growth, determined by LRAS
Rightward shift of LRAS/Outwards shift of PPF
Actual growth: Percentage annual increase in national output actually produced of equilibrium national income
Rightward shift of AD/Downward shift of SRAS
Factors
Structural factors
Political
Cultural
Social
External Factors
Growth dependent on foreign economies, due to reliance on exports
Supply Side factors
Technological advancement
Quality increase
Quantity increase
Demand Side factors
C + G + I + (X - M )
Increase actual output
Recession
Technical recession: Two consecutive quarters of negative growth
Economic Recession: Sustained period of negative economic growth
Effects
Negative outlook and pessimism
Govt budget strain
Deflationary sprial
Loss of welfare/output
Increased unemployment
Policies
Monetary Policies
Exchange rates
Interest rates
Fiscal policies
Technological improvements
Tax incentives for foreign investment
Tax incentives on R&D
Educational facilities
Investment
Govt expenditure on infrastructure
Tax concessions
Govt expenditure on Human capital
AS policies
Human capital
Infrastructure
Research and development (R&D)
Effects of Economic Growth
Benefits
Increased consumption leading to SOL increase
Easier income redistribution
Environmental care
Avoids other macroeconomic problems
Costs
Unemployment
BOP deficit
Income inequality
Environmental consequences, loss of non-renewable resources
Opportunity cost of current consumption
Social consequences