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Chap 10: economic growth - Coggle Diagram
Chap 10: economic growth
recession
strain on government budgets
negative outlook and pessimism
increased unemployment
may cause deflationary spiral
loss of output and welfare
economic growth
an increase in the real national output of a country over a period of time
sustainable growth: rate of growth that can be maintained in the long term without creating other significant economic problems (such as depleted resources and environmental problems), particularly for future generations
actual growth: the rate of growth in actual or real output, determined by growth in AD or increase in SRAS
potential growth: rate of growth of potential output, determined by increase in LRAS, i.e. productive capacity
measurement: percentage change in real GDP
cause
supply side
quality of factors of production
increase in labour productivity
increase in land productivity
increase in level of technology
supply of scientists and engineers
environment for research and development
quantity of factors of production
increase in availability of natural resources
increase in capital stock: investment in physical capital and economic infrastructure
increase in labour force
demand side (indirectly)
structural factors
external factors
economic development
economic growth accompanied by the qualitative improvement in the standard of living. It involves changes in the economic, social and political structure of the country
measurement
economic indicator
real GDP per capita
population demographics, poverty & income distribution, labour and employment, inflation, the extent of external trade, external debt, savings, military expenditure, rate of urbanisation
non-economic indicators
physical quality of life index
measure of economic welfare
human development index
inclusive growth
economic growth that creates opportunity for all segments of the population and distributes the dividends of increases prosperity, both in monetary and non-monetary terms, fairly across society
measurement
growth and development: GDP per capita; labour productivity; employment; healthy-life expectancy
inclusion: median household income; poverty rate; income Gini; wealth Gini
intergenerational equity and sustainability: adjusted net saving; public indebtedness; the dependency ratio of retirees and youth; carbon intensity of economic output
policy to encourage desirable rates of economic growth
fiscal policy
encourage investment
encourage technological improvements
monetary policy
AS side policy
consequences of economic growth on economy
benefits
enables easier redistribution of incomes
society can afford to care more for the environment
helps avoid other macroeconomic problems
increased levels of consumption leading to higher standards of living
costs
effects on income distribution
effects on employment
environmental costs and depletion of non-renewable resources
social effects
the current opportunity cost of growth
impact on balance of payments