Economic Growth

• What is economic growth?

  Increase in the level of national output over time, i.e. the annual percentage change in GDP
• What is gross domestic product?

  Measures the monetary value of all goods and services produced within a country per time period
• What is nominal gross domestic product?

  Measures monetary value of goods and services produced within a country for a given period of time usually one year
• What is GDP per capita?

  Measures GDP divided by the population size
• What is consumption?

  Value of all private household consumption within a country
• What is investment expenditure?

  Sum of capital spending by all businesses within a country
• What is the formula of GDP?

  Consumption + Investment expenditure + Government spending + (Import - Export)
• What is net exports?

  Monetary value of the difference between a nation's export earnings and its import expenditure
• What is Real GDP?

  Value of national income (GDP) adjusted for inflation to reflect the true value of goods and services produced in a given year
• What is the business cycle?

  Describes the fluctuations on economic activity of a country over time, creating a long-term trend of economic growth in an economy
• Business Cycle:

  1. Peak: Economic activity at its highest
  2. Recession: Fall in GDP
  3. Slump: High unemployment, consumption, investment etc. is low
  4. Recovery: Level of GDP starts to rise
  5. Boom: Level of economic activity rises
• Causes of economic growth

  • Factor endowments
  • Labour force
  • Labour productivity
  • Investment expenditure
• Advantages of Economic growth:

  • Improves standards of living
  • Employment
  • Tax revenues
• Disadvantages of Economic Growth:

  • Environmental consequences
  • Risk of inflation
  • Inequalities in income and wealth
  • Resource depletion