Chapter 10: Economic Growth
problems of recession
loss of output and welfare
increased unemployment
strain on government budgets
negative outlook and pessimism
may cause deflationary spiral
economic growth
short run
long run
actual growth
percentage annual increase in national output actually produced
economic booms and recessions
in a cycle
potential growth
rate of growth of potential output
outward shift of PPF curve
movement outwards of production point
actual growth exceeding potential growth
amount of idle resources and unemployment is reduced
infaltionary pressures build up, mainly through higher wages
excess labour demand leads to real wage growth outstripping productivity growth
unit labour costs increase, leading to an erosion of export competitiveness
GDP growth moderates towards potential growth
potential growth rate exceeding actual growth rate
inclusive growth
increase in spare capacity and increase in unemployment
growing gap between potential and actual output
growth that creates opportunity for all segments of the population
distributes the dividends of increased prosperity, both in monetary and non-monetary terms, fairly across society
measurement
groth and development
inclusion
intergenerational equity and sustainability
economic development
more comprehensive
economic growth accompanied by qualitative improvement in SOL
changes in economic, social and political structure of the country
measurement
measurement of economic development
economic indicators
non-economic indicators
real GDP per capita
population demographics
poverty and income distribution
labour and employment
inflation
extent of external trade
external debt
savings
military expenditure
rate of urbanisation
physical quality of life index
measure of economic welfare
HDI
causes
supply side
increase in quantity of factors of production
in labour force
availability of natural resources
capital stock
increase in quality
increase in labour productivity
in land productivity
in capital efficiency
increase in level of technology
demand side
affects actual growth in short run
structural factors
cultural, social and political environment
external factor
internal trade
policies
fiscal policy
fiscal incentives/disincentives to affect savings rate
level of government expenditure
policies to encourage investment
policies to encourage technological improvement
monetary policy
interest rate
money supply
aggregate supply side policies
education
training and retraining of skills
development of infrastructure
development of R&D
consequences
benefits
increased levels of consumption
avoid other macroeconomic problems ie. unemployment
easier redistribution of incomes
society can afford to care more for the environment
costs
current opportunity cost of growth
environmental costs and depletion of non-renewable resources
effects on income re-distribution
effects on employment; may lead to technological unemployment due to frequent changing of production processes
social effects
impact on BOP