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Economic Growth - Coggle Diagram
Economic Growth
Actual Growth
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Increase in AD or SRAS, assuming the economy is not in full employemnt
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Potential Growth
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When actual growth > potential growth, amount of idle resources are reduced and inflationary prices build up due to economy reaching full employment
When actual growth < potential growth, there will be an increase in spare capacity.
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Cost of economic growth
Opportunity cost of growth: Firms produce more capital goods than consumption goods to pursue higher growth in the future.
Environmental costs and depletion of non-renewable resources: In pursuit of fast economic growth, the country might exhaust their non-renewable resources and can also cause heavy pollution as they might not have proper procedures in place to reduce pollution caused by production.
Effects on employment: Growth can lead to changes in production procedures, and when growth is fast, the procedures can change quickly leading to people finding that they could not adapt to the fast changing nature of the industry. This could lead to structural unemployment if the firms deem the skills can be replacable by technology.
Social effects: Economic growth can cause a change in our lives, increase in stress and anxiety and an excessive pursuit of material growth can lead to a greedier and less caring society.
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Economic Development
Refers to economic growth accompanied by increase in standard of living. Can be gauged using economic and non-economic indicators such as PQLI, MEW and HDI.