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Chapter 9 Economic growth - Coggle Diagram
Chapter 9 Economic growth
Sources of economic growth
Actual
Rise in AD
Rise in SRAS
Potential
Rise in LRAS
Consequences of economic growth
Advantages
Benefits to households
Rising material SOL
Rising employment and wages
Benefits to firms
Increased profits
Increased expenditure on R&D
Sustained economic growth
Benefits to the government
Improvement in government's budget
Making growth more inclusive
Achieving sustained economic growth
Disadvantages
Inflation
Environmental degradation
Increased income inequality and non-inclusive growth
Increased unemployment of low skilled labour
Slow growth and recession
Policies to address
Demand-side policy
Fiscal policy
Increase government expenditure
On goods and services
Increase transfer payments
Reduce taxes
Direct
Indirect
Limitations
Size of multiplier
Possibility of crowding-out effect
Time lag
Government's budget deficit
Monetary policy
Monetary policy centred on i/r
Decrease i/r
Limitations
Size of multiplier
Interest elasticity of investments and consumption
Liquidity trap
Ability to control money supply
Quantitative easing
Limitations
Supply-side policy