Possible causes of economic growth
Causes of economic growth
- Created by: Aimen Kamran
- Created on: 09-06-13 13:09
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- Possible causes of economic growth
- Recovery
- Measured by annual % change in real national output
- Can be incorrect if income rises but this is due to hot money flows or inward income disguised as exports (e.g. with China)
- Measured by annual % change in real national output
- Recovery
- Long-term growth
- Possible causes of economic growth
- Recovery
- Measured by annual % change in real national output
- Can be incorrect if income rises but this is due to hot money flows or inward income disguised as exports (e.g. with China)
- Measured by annual % change in real national output
- Recovery
- Shown by increase in trend/potential GDP and shift in LRAS
- Possible causes of economic growth
- Caused by increase in AD
- If an econ is operating below productive potential i.e. within PPF
- Def: Long-term expansion of a country's productive potential
- Can also be due to shift in SRAS
- Which uses up idle resources like labour
- Can be from fiscal stimulus (Keynesian ) to stimulate AD and decrease demand-deficient Un. Can cause temporary growth but may be unsustainable with large deficit
- Caused by increase in AD
- If an econ is operating below productive potential i.e. within PPF
- Caused by increase in AD
- Can differ greatly between 'emerging' market economies and already developed countries. China and India ---> fast growing but slowing recently. UK --> far slower growing.
- Long-term growth
- Shown by increase in trend/potential GDP and shift in LRAS
- Long-term growth
- Variations for growth rates of dif economies depending on business cycle and whether developed or 'catching up'
- Economic stability and sound macro policy
- Increased labour activity and participation
- Increased labour productivity
- Investment in physical capital
- Improved human capital
- Enterprise
- Firms produce more if expect D to rise at stable rate
- Economic stability and sound macro policy
- Economic stability and sound macro policy
- Fluctuations lead to uncertainty and policies aimed at stability create good environment for business investment
- relaxed attitudes to women working
- Increased labour activity and participation
- Increased labour activity and participation
- flexible working practices
- incentives in tax system
- tougher benefits
- retraining schemes for occupational mobility
- greater output per worker p.h.
- Increased labour productivity
- Increased labour productivity
- more technology
- Investment in physical capital
- Investment in physical capital
- Education and training
- Improved human capital
- Improved human capital
- Low tax of business profits and wealth
- tax relief for R&D
- tougher competition policy
- encouraging foreign investment inward bringing best practice from our int'l competitors
- encouraging macro stability
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