Economic growth

Cards (24)

  • Policies to promote economic growth
    • Negative output gap
    • Expansionary fiscal policy
    • Expansionary monetary policy
    • Supply side policy
  • Negative output gap
    Aim: + Aggregate demand
  • Expansionary fiscal policy
    Aim: - Tax + spending + borrowing
  • Expansionary monetary policy
    Aim: - OFC(interest rate) + money supply
  • Supply side policy
    Aim: + supplyprice
  • Expansionary, monetary and fiscal policy
    Might not stimulate aggregate demand enough, or, it might overstimulate the economy, resulting in inflation
  • Government underestimates the size of the multiplier

    Might increase its spending by too much, which will result in demand pull inflation
  • To promote potential economic growth
    Govt. will encourage increase in aggregate supply
  • Methods to increase aggregate supply
    1. Provide subsidies to train workers
    2. Improves productivity of workers
  • May not always work since we need to train workers in jobs that are needed in the economy
  • Inclusive economic growth
    Economic growth that is fairly distributed across society and creates opportunities for all
  • Benefits of economic growth being distributed fairly
    • Monetary terms, with all experiencing a rise in income
    • Non-monetary terms, with all experiencing an improvement in healthcare, for example
  • Creating opportunities for all
    • Generating more job opportunities
    • Creating the opportunity for all workers to experience better working conditions
    • Creating the opportunity for all to live safely
  • Economic growth in some countries and in some periods
    Has created greater equality and a more even distribution of income
  • Economic growth in many cases
    The benefits have not always been shared equally or fairly
  • Economic growth involves change. Some new industries are created but others disappear. Those workers who are occupationally and geographically immobile may become unemployed
  • Economic growth
    Can also be accompanied by a widening of the pay gap
  • In 1965, the top US chief executives earned more than 20 times as much as the average full time US worker. By 2020, this had risen to 320 times greater. While US worker did not change. The higher purchasing power went to the owners of capital and chief executives
  • During this period there was also a rise in the gig economy with more workers in insecure jobs with few rights and no guaranteed working hours
  • Globally, economic growth has been accompanied by widening income inequality. In 2020, the richest 1% of the world's population earned more than 25 times as much as the poorest half of the world's population
  • Policies to promote inclusive economic growth
    • Redistribution of income using progressive taxes and transfer payments
    • Improved access for all to high quality education which should raise employment opportunities and pay
    • A relatively high national minimum wage to ensure that those in work can enjoy a good quality of life
    • Anti-discrimination legislation so that no group is excluded from the benefits of economic growth
    • Improvements in transport and communication links to reduce geographical immobility of labour and regional differences in income
    • Trade union legislation that gives trade unions greater power to protect workers' rights
    • Legislation against slavery and child labour to ensure that vulnerable groups are not exploited
  • Sustainable economic growth
    Economic growth that can continue over time
  • To achieve sustainable economic growth requires a deliberate and determined effort to balance economics, social and environmental objectives
  • Social division, lack of access by some to good quality education, housing and healthcare and damage to the environment can threaten an economy's ability to continue to produce a higher output