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Chapter 10: Economic Growth - Coggle Diagram
Chapter 10: Economic Growth
Recession
Technical:
2 consecutive quarters
of negative economic growth.
Economic: A
sustained period
of negative economic growth.
Impact
Strain on government budgets
Pessimism
Increased unemployment
Potential of deflationary spiral
Loss of output & welfare
Growth
Actual: Determined by
growth of aggregate demand
and/or
short-run aggregate supply
.
Potential: Determined by
growth of productive capacity
.
Inclusivity: Creates
opportunity for all segments of population
and distributes dividends
(both monetary and non-monetary)
of increased prosperity
fairly across society
.
Development: Economic growth
accompanied
with a
qualitative
improvement in the
standard of living
.
Sustainability: Does not create any
other significant economic problems
(e.g. environmental damage)
Causes
Demand-side factors (increase in aggregate demand)
Supply-side factors (i.e. increase in productive capacity)
External (i.e. international trade)
Structural
Social (e.g. allowance of fluid upward/downward mobility based on performance & merit)
Political (i.e. stability of political landscape)
Cultural
Policies
Fiscal
Demand-side
Monetary
Supply-side
Consequences
Costs
Worsening income inequality
due to different rates of growth in industries and sources of income
Structural unemployment
due to rapid evolution of methods used in production (i.e. automation of labour)
Increased
distress
due to an excessive pursuit of material growth (e.g. increased crime, divorce rates, etc.)
Deficit in
balance of payments
Environmental
costs (incl. depletion of non-renewable resources)
Opportunity cost of consumer goods
in favour of capital goods
Benefits
Prevention of other macroeconomic issues
Increased consumption
due to raised incomes
Increased awareness for
environmental care
Easier government redistribution of incomes
with higher tax revenues
Actual > Potential
Increased
gap
between potential output and actual output
Increase
in spare capacity & unemployment
Actual < Potential
Inflationary
pressures (mainly through
higher wages
)
Growth in GDP
moderates
towards potential growth
Growth in real wages
exceed
growth in productivity
Reduction
of idle resources & unemployment