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Economic Growth - Coggle Diagram
Economic Growth
Types
Inclusive Growth
Creates opportunity for all segments of the population
Distributed dividends of prosperity fairly across society
Economic Recession
Sustained period of negative growth
Sustainable Growth
Growth that can be maintained in the long term
Doesn't create economic problems
Implied positive and stable growth over a n extended period of time
Technical Recession
Two consecutive quarters of negative growth
Actual growth
Determined by AD and SRAS
Growth in Real Output
Potential Growth
Determined by LRAS
Growth in potential output
Causes
Supply Side Factors
Increase in quantity of Factors of Production
Increase in quality of
Factors of Production
Increase in Technology level
New Capital investment possibilities
Increased productivity
Demand Side Factors
In the short run, actual growth increases
In the long run, productive capacity increases
Structural Factors
Cultural attitudes towards work
Political stability
Legal institutions
Effects
Growth
Costs
Resources invested on capital goods
Opportunity Costs
Higher consumption
Higher level of production
Greater pollution
Environmental costs
Varied increase in wages
Increased income inequality
Change in skills required from labour force
More workers laid off
Increases unemployment
Social Effects
Benefits
Increased income
Less focus on private consumption
Society can greater care for the environment
Increased household income
Increased consumption
Higher SOL
Increased income
Increased tax revenue
Easier distribution of income
Recession
Fall in Economic Output
Decrease in material SOL
Loss of output and welfare
Fall in GPL
Decrease in Consumer expenditure
Further fall in output
Deflationary spiral
Lack of confidence in Economic recovery
Negative Outlook
Decrease in Household income and spending
Decrease in tax revenue
Strain on government budgets
Less labour needed
Increased Unemployment
Factors affecting Standard of Living
Unemployment
Measurements
Unemployment rate
(Number Unemployed/Labour Force) × 100%
Natural Unemployment
Frictional Unemployment + Structural Unemployment
Labour Force Participatiion Rate
(Labour Force/Working age Population) × 100%
Types
Seasonal Unemployment
Seasonal fluctuations in Economic Activity
Real Wage Unemployment
Forced increase in Real Wages
Cyclical Unemployment
Business cycle of alternating booms and slums in activity
Frictional Unemployment
People on the Labour Force who aren't employed
Structural Unemployment
Mismatch of skills and job vacancies
Effects
Waste of resources
Reduced potential growth
Loss of Output of Goods and Services
Welfare loss
Fall in Tax Revenue
Budget costs
Fiscal costs to Government
Waste of resources on training
Fall in labour quality
Long term fall in potential growth
Loss of Productive capacity
Lowered SOL
Social Impact
Inflation
Types
Inflation
Sustained increase in GPL
Disinflation
Increase in GPL at a decreasing rate
Deflation
Sustained decrease in GPL
Measurements
Consumer Price Index
Average of retail prices
Producer Price Index
Index on Wholesale Prices
GDP Deflator
Change in average price level
Causes
Demand-Pull inflation
Autonomous Increase in AD
Monetary Factors
Cost-Push Inflation
Import Price Push
Increase in structural rigidities
Wage push
Currency depreciation
Supply-side shocks
Profits Push
Effects
Consumers
Encourages saving
Prevents decline in SOL
Producers
Firms are able to make long term plans
Increase Profitability
Lower inflation in than other countries
Lower prices for input factors for Exports
Less resources spent on reprinting pricelist
Lower menu costs
Economy
Stimulation of Investment
Increase in AD
Economic Growth
Fall in Unemployment
Lower Inflation rate than other countries
Increase in Net Exports