Economic Growth

    Cards (16)

    • Economic Growth - an increase in the production of goods and services in an economy.
    • Economic growth is stimulated by:
      • Monetary Policy (Central Bank)
      • Fiscal Policy (Government)
      • Supply Side Policy
    • Circular Flow of Income - the movement of money through an economy
      • Money flows from producers to workers as wages and flows back to producers as payment for products
    • Gross Domestic Product (GDP) - the total value of the goods and services produced in a country during a specific period of time
      • used throughout the world as the main measure of output and economic activity
    • Measuring GDP - adding up all of the money spent by consumers, businesses, and government in a given period
      • The sum of all purchases or the sum of all products produced in an economy
      • Can be difficult to measure due to black markets and unreported incomes
    • GDP per Capita - used to get a measure of the standard of living in an economy
      • If GDP rises faster than the population increase = higher standard of living
      • If GDP rises slower than the population increase = lower standard of living
    • Nominal GDP - not adjusted for inflation
      • Does NOT provided an accurate reflection of economic growth
    • Real GDP - adjusted for inflation
      • Provides a more accurate reflection of economic growth
    • Causes of a Rise in GDP (Economic Growth)
      • Increased spending due to increased confidence
      • Tax cuts to increase disposable income
      • Lower interest rates
      • Increase/Improvement in resources (Factors of Production)
    • Policies to promote economic growth
      • Lower Interest Rates (Monetary Policy)
      • Lower Taxes (Fiscal Policy)
      • Increased Govt Spending (Fiscal Policy)
      • Improved Education/Training (Supply Side Policy)
      • Innovation
    • Costs of Economic Growth
      • Increased Pollution
      • Inflation
      • Greater divide between classes
    • Recession - reduction in real GDP over two consecutive quarters (6 months)
    • Impacts of a Recession:
      • A decrease in aggregate demand or supply
      • Higher unemployment
      • Lower standard of living
      • Reduced investment
      • Reduced production
      • Reduced Tax Revenue
    • Economic Growth Rate - percentage change in GDP
      • A decrease in growth rate does not mean a decrease in production
    • International Monetary Fund (IMF) - organization that works to achieve sustainable growth and prosperity for all of its 190 member countries.
    • Sustainable Economic Growth - economic development that attempts to satisfy the needs of humans but in a manner that sustains natural resources and the environment for future generations.
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