Economics Unit 4 - created from Mind Map

Economic growth Invest new capital goods (physical) Enlarge national capital stock and human capital Technical process better? Endogenous growth theory: Gov create supply conditions- favour investment and technical progress Infrastructure and judicial system

Costs and benefits of economic growth Aim of econ activity: Improve economic welfare & standards of living Econ growth help achieve this, econ growth be compatible with econ development Economic devolpment Improve living standards- reduces poverty & human suffering Access to resources Access to human development- education Environmental sustainability and regeneration Sustainable economic growth Finite resources Resource degration Use renewable Technologies minimise polllution

Fluctuations in economic actviity Speculative bubbles Demand shocks Political business cycle Seasonal fluctutaions Long cycles Supply shocks Rapid growth in asset prices, far above real value. Bubble burst & confidence low, fall into recession Contract demand and in boom Reflate/ boost in recession Demand management policies Monetary Policy Fiscal policy Need to be accurate timing Bad timing destabilise economy and make it more volatile Long-term risky investments abandoned for less risky short-term projects Unexpected interest rate/tax changes may affect competitiveness and long term growth adversly Generate a pre election boom & deflate the economy after election until the next one Investments in long run technology progress Creating a "new economy"

National Income Indicator for living standards? Comparing between countries Underestimate economic welfare & living standards Overestimate economic welfare & living standards Standard of living made up of Non-monetised economy underrespresented Economic activity (illegal) in hidden economy is ommited Positive externalities not seen Quality improvements are under- represented DIY and housework Negative externalities not seen Welfare loss may be seen as increase in national output Installing regrettables raises national income Income distribution Producing higher output = more strain on workers and get ill Extra production & consumption in healthcare seen as welfare gain! Burglar alarms- but prefer not to need them Economic welfare from goods and services Economic welfare from quality of life factors Economic welfare from public goods and merit goods Statistical sophisitication of data collection

Economics Unit 4