5468259
Description
Flashcards by Sophie Knight, updated more than 1 year ago
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Created by Sophie Knight
almost 8 years ago
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| Question | Answer |
| What is the difference between actual economic growth and potential economic growth? | Actual = increase in GDP Potential = Increase in capacity of the economy |
| What is export-led growth? | Economic growth caused by a rise in net exports. It has the effect of stimulating the economy while improving trade balance |
| How does potential economic growth occur? | When the vertical part of the AS curve shifts to the right, increasing the amount that the economy could produce. |
| What is a problem with export-led growth? | It leads the country to be vunrable to changes in other economies and the exchange rate |
| What are 4 constraints on growth? | 1. Absence of efficient capital markets 2. Government instability 3. Labour market problems 4. External constraints eg. trade |
| what is an output gap? | The difference between actual and potential growth in GDP |
| what are 3 effects of a positive output gap in the economy? | 1. Tight labour markets 2. Wage pressures 3. shortages of raw materials |
| Why is it hard to calculate the value of an output gap? | Not all unemployed resources would have the same impact on the economy if they were employed |
| How does the Keynesian view on output gaps differ from the Classical views? | Keynesians believe that a negative output gap can exist in the long run as well as the short run Classical economists believe that an output gap cannot exist in the long run as the AS curve is vertical |
| What 4 ways does economic growth benefit consumers? | 1. Incomes and wealth rise 2. People can save for the future 3. More job confidence 4. More employment opportunities |
| How does economic growth benefit firms? | They make more profit which they can then invest and grow further |
| What 3 ways does economic growth help the government? | 1. Rise in income tax, VAT, capital gains tax and corporation tax 2. Less demand for benefits 3. Healthier fiscal position |
| What are 5 disadvantages of economic growth? | 1. Income equality 2. Environmental problems 3. Balance of payments problems 4. Bottlenecks in the economy 5. Social dislocation and stress |
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