Economic Performance

• What are the two types of economic growth?

  Short-run and long-run growth
• How is short-run growth defined?

  Growth from using existing resources more efficiently
• What typically drives short-run growth?

  Changes in aggregate demand

  
• What is another term for short-run growth?

  Demand-side growth
• What can also drive short-run growth besides aggregate demand?

  Changes in factors influencing short-run aggregate supply

  
• What characterizes long-run growth?

  Sustained improvements in production factors
• What factors drive long-run economic growth?

  Technological advancements and capital accumulation
• What is the effect of changes in aggregate demand on short-run growth?

  It causes short-run economic growth

  
• How does demand-side growth manifest on a production possibilities curve (PPC)?

  • Movement from inside the curve to closer to the curve
  • Illustrates increased efficiency in resource use

  
• What does a rightward shift in aggregate demand indicate?

  Increased real output and economic growth

  
• What happens when the economy operates below full potential?

  There is spare capacity available
• What does an increase in output on a PPC represent?

  An increase in real GDP

  
• What causes short-run supply-side growth?

  Shifts in the SRAS curve

  
• What can lead to a rightward shift in the SRAS curve?

  A fall in production costs

  
• What does long-run economic growth result from?

  Improvements to long-run aggregate supply determinants
• How is long-run economic growth illustrated on an AD/AS diagram?

  By a rightward shift in the LRAS

  
• What does an outward shift of the PPC indicate?

  Long-term economic growth
• What can improve the quality of labor as a factor of production?

  Training and education
• How can the quantity of labor be increased?

  By changing migration policies
• What does 'long-run economic growth' refer to?

  The trend rate of growth of real national output
• What is real GDP?

  Output value adjusted for inflation

  
• What are the benefits of economic growth?

  Increased employment and productivity
• What negative externalities can arise from economic growth?

  Increased air pollution and waste generation
• How can economic growth affect resource availability?

  It can lead to depletion of natural resources
• What can result from unequal distribution of wealth during economic growth?

  Increased income inequality and social tensions
• What is a characteristic of a recession?

  Two consecutive quarters of negative growth
• What happens during a boom phase of the economic cycle?

  High rates of economic growth occur
• What is a positive output gap?

  Growth of real GDP above the trend

  
• How can government intervention affect the economic cycle?

  It can moderate fluctuations in GDP
• What are the characteristics of a boom and a recession?

  Boom Characteristics:

  • High economic growth
  • Decreasing unemployment
  • High confidence in firms

  
  

  Recession Characteristics:

  • Negative economic growth for two quarters
  • Increasing unemployment
  • Low confidence in firms
• What is the impact of economic growth on individuals?

  Increased income levels for many individuals
• How does economic growth affect the environment?

  It can lead to negative externalities like pollution
• What is the economic cycle?

  Changes in real GDP over time

  
• What does the long-term trend rate of growth represent?

  The sustainable rate of growth over time
• What are the four points in the economic cycle?

  Peak, slowdown, recession, recovery
• What is a negative output gap?

  Growth of GDP below the trend

  
• How can government actions influence the economic cycle?

  By adjusting taxes and spending
• What are the costs and benefits of economic growth?

  Benefits:

  • Increased employment and productivity
  • Higher GDP and living standards
  • Improved infrastructure

  
  

  Costs:

  • Environmental degradation
  • Resource depletion
  • Income inequality
• What can happen to the distribution of wealth during economic growth?

  It can become more unequal
• What is the impact of economic growth on the economy?

  It can achieve macroeconomic goals