Economic Growth

• Economic Growth

  increasing capacity of the economy to satisfy the wants of its members measured by Real Gross Domestic Product (GDP)
• GDP

  represents the total dollar value of all final goods and services produced over a specific time period
• Target Range for GDP

  3-3.5%
• Current GDP

  1.3%
• Calculating Change in GDP

  GDP Year 2 - GDP Year 1

  over X 100

  GDP Year 1
• Limitations of GDP

  GDP makes no adjustment for leisure time

  GDP only counts goods that pass through official,organized markets, misses home production and balks market activity- big exclusion especially in developing countries where much of what's consumed is produced at home.

  GDP doesn't adjust for the distribution of goods what ruler receives verses households

  GDP doesn't adjust for pollution costs
• Alternatives for GDP

  Index of Sustainable Economic Welfare accounts for both pollution costs and the distribution of income

  GDP isn't perfect but no alternatives are close to replacing it
• Variations in Economic growth

  Human Resources- quality and quantity is high ( educated and large population)

  Natural Resources- abundance of resources increases production of goods GDP increases e.g Australia with iron ore

  Infrastructure/capital formation stocks of buildings, energy provisions, transportation, communicating network. When country has a well functioning infrastructure, production of goods increases GDP increases e.g Singapore strong public transport and fast internet

  Political Factors. stable and transparent government increase in business ventures ( more businesses come to country) increase in production of goods GDP increases
• Benefits of High Economic Growth

  Increasing income and material welfare

  More jobs/ lower unemployment

  taxation revenue will increase lower spending
• Costs of High Economic Growth

  inflation Risk creates demand pull inflation

  Environmental Impacts high growth rates negative effects on the environment's e.g traffic congestion

  Structural Change decline in traditional industries workers in declining industries face structural unemployment