Economic Growth
- Created by: emmathwaite
- Created on: 12-02-19 19:41
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- Economic Growth
- Def: A positive change in the actual output of goods and services produced by FOP's in an economy o.p.t.
- G.D.P is a way of measuring economic growth
- G.D.P is a measure of the value of total output produced by the FOP's based within national boundaries o.p.t.
- Limitations of GDP: accuracy, social costs, cost of living, hidden economies, exchange rate, wealth etc.
- There are three different ways to measure GDP using the circular flow model:
- 1. Output method - measure the value of all goods and services produced in an economy by firms in a year.
- 2. Expenditure method - measure the amount of expenditure on goods and services, plus the value of those added to stocks.
- 3. Income method - measure the return on all FOP's paid by firms to households.
- Nominal GDP = measures the value of national output at current prices with no adjustment for the effects of inflation.
- Real GDP = measures the volume of output. It is adjusted for inflation and measured at constant prices.
- Calculating real GDP = nominal GDP x pr index in base yr (100)/pr index in current yr
- G.D.P is a measure of the value of total output produced by the FOP's based within national boundaries o.p.t.
- A recession is two quarters of negative growth
- Withdrawals from the circular flow model: savings, taxes, imports
- Injections into the circular flow model: investment, government spending, exports
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