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Economic Growth (the problems of recession (loss of output and welfare -…
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Econ growth, inclusive growth and econ development
Econ growth--> increase in RNO over period of time Sustainable growth --> rate of growth that maintained LT wo creating sig. econ problems for future generations
actual growth--> rise in AD -->create unplanned fall in stocks -->increase production and output -->reduce stack in economy -->faster rise in AD, higher the SR rate of actual growth will be
increase in SRAS--> GPL decrease and increase in PP of households and increase in spending of GnS
Potential growth--> rate of growth of potential output -->when capacity to produce increases -->increase in LRAS-->increase in productive capacity
actual growth exceeds potential growth -->inflationary pressures, amt of idle resources and UnE reduced , unit labour costs increase (erosion of export competitiveness
potential growth exceeds actual growth --> increase in spare capacity and an increase in UnE --> growing gap btw potential and actual output
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inclusive growth
measurement of inclusive growth: Growth and Devt, Inclusion and intergenerational equity and sustainability
econ development
econ devt --> econ growth accompanied by qualitative improvement in SOL, involves changes in economic, social and political structure of economy
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causes of EG
supply side factors --> for sustained EG needs to have increase in productive capacity of economy, achieved when quantity of factors of production, quality of FOP or tech improve
increase in labour force --> increase in potential output-->increase in working age population/participation rate
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demand side factors --> indirectly affect economy productive capacity, in the short run they will affect actual growth and LR indirectly affect economy productive capacity
structural factors --> legal institutions are needed to provide law and order to enforce contracts btw parties of econ transactions and to protect private property rights
external factors --> international trade opens up markets for exporters and enables exporting firms to enjoy EOS, rate of growth of rest of world impt to country with a large foreign trade
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