Economic Growth and Cycles

• Give detail on PPPs:

  • PPPs are the rates of currency conversion that equalise the purchasing power of different currencies by eliminating the price difference between countries.
  • the purchasing power of a currency refers to the currency needed to purchase a given unit of a good, or common basket of goods and services.
• What are PPPs cells determined by?

  PPPs are clearly determined by cost of living and inflation. They are taken into account.
• Why are PPPs useful?

  • It is about knowing how far your income will take you.
  • PPPs allow economists to compare economic productivity and standards of living between countries.
• In the short run, what is the primary cause of an increase in economic growth and what does it lead to?

  
  

  • An increase in aggregate demand.
  • This leads to actual economic growth.
  • Economic growth can also occur if there is an increase in short-run aggregate supply.
• What are the two causes that Can lead to actual economic growth?

  • an increase in aggregate demand
  • an increase in aggregate supply
• What are some details about potential economic growth?

  • For long-run economic growth to occur, there must be an increase in the productive capacity of the economy, that is to say an increase in long-run aggregate supply.
  • This leads to potential economic growth.
• What are the cons of economic growth?

  • negative externalities - environmental impacts
  • wealth and income inequality
  • inflation - demand-pull
  • worsening trade balance (higher impacts and stronger currency)
  • depletion of net resources
  • over-worked employees/capital
• What are the measures of economic growth?

  • GNP
  • GDP
  • GNI
• What are some details about GNP?

  GNP:

  • GNP plus net income from abroad
  • GNP increased the income from UK firms abroad
  • GNP=GDP+net income receipts from assets abroad - income of foreign nationals within the economy.
• What are some details about GDP?

  GDP:

  • The total value of output produced in a given time period.
  • GDP includes the output of foreign owned businesses that are located in a nation following foreign direct investment.
• What are some details about GNI?

  GNI:

  • GNI measures the final value of incomes flowing to UK owned factors of production whether they are located in the UK or overseas.
  • GNI=GDP+payments by foreign nationals into hte country for such things as investments (interest and dividends), less similar payments paid out of the country.