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Chapter 10: Macro Aims - Economic Growth (Recession leads to (increased…
Chapter 10: Macro Aims - Economic Growth
Recession leads to
increased unemployment
strain on the government budgets
loss of output and welfare
negative outlooks and pessimism
may cause deflationary spiral
defined as
increase in the real national output of a country over a period of time
is beneficial but government seeks to achieve
sustainable growth
is defined as
rate of growth that can be maintained in the long term without creating other significant economic problems, particularly for future generations. implies a positive and stable growth rate over an extended period of time.
types
potential
is the rate of growth of potential output
caused by
supply side factors(outward shift of PPF)
actual
is defined as
percentage annual increase in national output actually produced or equilibrium income
caused by
rapid rise and reduction in AD (business cycle)
increase in SRAS
may only benefit certain segments of the population, unlike
inclusive growth
is defined as
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
is measured by
World Economic Forum
growth and development
inclusion
intergenerational Equity and Sustainability
+SOL
Economic Development
defined as
economic growth accompanied by the qualitative improvement in the SOL. it involves changes in economic, social and political structure of the economy
measures of ED
economic indicators
change in real GDP per capita
population demographics
poverty and income distribution
labour and employment
external debt
inflation
non economic indicators
measures of economic welfare
human development index
physical quality of life index
measures of EG
national output or GDP at constant dollars
growth rates
Causes of EG
supply slide factors
quality of factors of production
increase in land productivity
increase in capital efficiency
increase in labour productivity
quantity of FOP
increase in availability of natural resources
increase in capital sock: investment in physical and economic infrasturctures
increase in labour force
increase in level of technology
demand side factors (AD)
structural factors
favourable cultural, social and political envirnment
external factors
related to
trade
Policies to encourage desirable rates of EG
monetary polices
fiscal policies
fiscal incentives/disincentives
level of government expenditure
AS side policies
have
consequences
developed countries
*depends on the initial state of the economy in terms of space and productive capacity
developing countries
remove mass poverty or unemployment
benefits
helps avoid other macroeconomic problems
enables easier redistribution of incomes
increased levels of consumption leading to higher SOL
society can afford to care more for the environment
costs
effects on income redistribution
effects on employment
environmental costs and depletion of natural resources
social effects
the current opportunity costs of growth
impact on BOP
social effects