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Economic Growth - Coggle Diagram
Economic Growth
Recession
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Increased unemployment. Level of output falls -> less labour required to produce reduced amount of output -> increase unemployment
Strain on gov budgets: Increase in unemployment -> Y of households & spending fall -> T fall. Increase in unemployment -> transfer payments & societal welfare increase.
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Deflationary spiral: Recession -> fall in GPL due to fall in AD. Households & firms expect prices to fall -> withhold spending -> fall in output and Y and GPL -> deflationary spiral
Causes
Supply-side
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Increase in level of tech. Rate of technological progress depends on supply of scientists and engineers and environment for R&D. New technology -> new capital investment possibilities -> greater productivity & higher Y -> changing demand patterns + encouragement of more R&D -> further technological improvements
Demand-side: In SR, affect actual growth. In LR, affect productive capacity.
Structural: Favourable cultural, social & political environment promote growth. Cultural attitudes towards work and material advancement determine incentives to work.
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Inclusive Growth
Benefits of economic growth fairly distributed among the people such that no particular segments of population excluded from benefits -> creates productive employment opportunities. Enable people to fulfil their own potential -> enhance potential of the economy. Unequal distribution of Y -> lower levels of social mobility & fails to take full advantage of people -> people not motivated to invest in their education, skills and careers if they perceive their job prospects to be low-paid
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 S, public indebtedness, dependency ratio, carbon intensity of economic output
Measurement
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Economic Development
Economic indicators: Change in real GDP per capita. Takes into account all output produced in the economy and converts them into a single measure using market prices. Shortcomings include failure to include non-marketed subsistence production and to incorporate welfare and income distribution concerns.
Non-economic indicators: PQLI, MEW, HDI
Consequences
Benefits
Increased levels of consumption -> higher material SOL. Economic growth outstrips population growth -> higher real Y per capita -> higher C
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Society can afford to care more for the environment. Affluence rises -> less preoccupied with private C and more concerned to live in a clean environment. Regulation of pollution more stringent in DCs
Costs
Current opportunity cost of growth. Faster growth -> invest more and acquire capital goods -> resources diverted away from consumer goods towards capital goods. SR, opportunity cost of higher growth in the future is less current C
Environmental costs and depletion of non-renewable resources. Richer -> more concerned for the environment. Higher C -> greater level of production -> higher pollution and waste
Income distribution: Some may gain from higher SOL, others likely to lose. Growth -> wages & salaries rise. Worsened if workers in declining industries get retrenched -> structurally unemployed due to lack of skills -> greater income inequality
Employment: Higher rate of growth -> higher rate of change in production techniques -> skills no longer relevant -> structural unemployment
Social: Increasing stress & anxiety levels, excessive pursuit of material wealth -> selfish and less caring society.
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