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economic growth and sustainability , - Coggle Diagram
economic growth and sustainability
Actual vs Potential Growth
Actual Growth:
Increase in real GDP due to higher demand or utilization of existing resources.
Potential Growth:
Increase in the productive capacity of the economy, represented by a shift in the Production Possibility Curve (PPC).
Output Gaps
Positive Output Gap:
When actual output exceeds potential output, leading to inflationary pressures.
Negative Output Gap:
When actual output is below potential output, indicating underutilized resources and higher unemployment.
Business (Trade) Cycle
Phases:
Boom: High economic growth and demand, inflationary pressures.
Recession: Negative growth, rising unemployment, falling demand.
Trough: Economy at its lowest point, low demand, high unemployment.
Recovery: Growth starts picking up, rising demand, employment increases.
Causes:
Fluctuations in aggregate demand (AD), changes in business confidence, external shocks (e.g., oil prices, financial crises).
Automatic Stabilisers
Definition:
Economic policies and programs (e.g., progressive taxes, unemployment benefits) that automatically stabilize fluctuations in the business cycle.
Role:
Reduce the severity of economic fluctuations by increasing government revenue in booms and boosting spending in recessions.
Policies for Economic Growth
Fiscal Policy:
Government spending and taxation to stimulate demand and promote investment.
Monetary Policy:
Adjusting interest rates to influence borrowing and spending.
Supply-Side Policies:
Policies aimed at improving productivity and increasing the economy's capacity to produce.
Inclusive Economic Growth
Definition:
Economic growth that is broad-based and benefits all sections of society, reducing inequality.
Impact on Equity and Equality:
Inclusive growth improves income distribution, reduces poverty, and enhances social equity.
Policies to Promote Inclusive Growth:
Education and healthcare investment, progressive taxation, targeted welfare programs.
Sustainable Economic Growth
Definition:
Growth that meets current needs without compromising the ability of future generations to meet theirs.
Using vs Conserving Resources:
Using Resources:
Extracting and utilizing natural resources for economic activity.
Conserving Resources:
Preserving resources through efficient use, recycling, and alternative energy sources.
Impact on Environment:
Unchecked economic growth can lead to environmental degradation, pollution, and climate change.
Policies to Mitigate Environmental Impact
Green Taxes:
Taxes on pollution and emissions to encourage cleaner production methods.
Regulations and Standards:
Government-imposed limits on pollution and resource extraction.
Investment in Green Technology:
Promotion of renewable energy, energy-efficient technologies, and sustainable agriculture.
International Agreements:
Cooperation between nations to combat climate change (e.g., Paris Agreement).