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What is meant by economic growth? Economic growth is an increase of the in the real level of output. It refers to an increase in a countries annual output of goods and services. The most common measure of this is G. D. P.
Economic growth figures must be corrected for inflation. Nominal G. D. P. is not adjusted for inflation whereas real G. D.
P. is. Economic growth is also a long-term expansion of the productive potential of the economy. Sustained economic growth should lead to an increase in real living standards and rising employment.
Explain the differences between an economic recession and an economic boom. An economic recession and an economic boom are best described using the diagram of the economic cycle as shown below. There are four important stages. The slowdown towards the recession and the recovery towards a boom. They are both opposites to each other. A recession is a period when a countrys economy is less successful and more people become unemployed.
Whilst a boom is the peak of a countries economy and it is at its most successful. We see a recession on the diagram when the real GDP goes down and not up. When it at the furthest down it is going to go and it goes back up, it is called the trough of recession. Whilst the boom is when GDP is at its highest it is going to go before it will drop. This is called the peak of the boom. Why is investment important to the UK economy?
Investment is when money from profits made are used to buy products that aid production in order to increase the quality or quantity of the output. Investment is normally in new capital. This will increase output from normal and also mean that they would be getting more out than they were putting in. The UK economy at the moment is not as productive as the Japanese or the American economy. The Japanese invested loads of money into new modern capital after the World War 2. This is why they are doing well.
Whilst American productivity is twice that of the UK. This is because the Americans had recently over time invested a lot into buying new capital to the point that they now have too much. The UK economy is suffering, as they have not spent much in recent years investing in capital. The capital they use now, are old and not as efficient as what the other countries have. The two most economically powerful countries in the world both have modern capital and the UK is slowly falling further and further behind them. This is why it is necessary to rebuild the UK economy to its old stature when the UK was the strongest power in the world.
What are the main advantages and disadvantages of economic growth? The main advantage of economic growth is that it improves living standards. (As measured by real G. D. P. per capita) Then Growth also stimulates higher employment levels.
Economic growth also has positive effects on government finances because of government benefits. The last significant advantage of economic growth is that it makes it easier to redistribute income to the poor. The disadvantages of economic growth are that the economy will grow too quickly and therefore, there might be a danger of inflation. Growing income and wealth inequalities in societies are also disadvantages. Negative externalities are also given off (pollution and congestion) which damage social welfare and there will also be a depletion of non-renewable resources, such as North Sea oil, which will eventually run out. What are the main causes of economic growth?
There and two types of economic growth. Short run and long run growth. Short run economic growth can be caused by consumer expenditure, investment expenditure, government spending, exports and imports increasing. Long run economic growth though, can be increased by increasing the factors of production in the economy.
These include, land, labour and capital. Long run economic growth involves an increase in the productive potential of the economy. Land includes natural resources and if a country is rich in natural resources, its economy is likely to grow. North Sea oil contributed 2 - 3 % a year to economic growth in the 1980 s.
But the economy only grows if there is demand for the resource and if it has a high market value. On the labour side, economic growth is caused by labour as an increase in population makes it possible to increase the countrys output. But this also does not mean that income per head is growing. Increasing the quantity and quality of the workforce with training, education and experience also increase the size of the workforce. Economic growth also increases with the stock of capital. More capital increases productivity.
This is due to investment in technology, growth of new industries and new techniques in production. Economic growth can be caused by massive growth in consumer spending. This is because if the government lowered interest rates to try and make people buy more and spend less. People will go out and borrow money to buy houses and cars, which they would normally not be able to afford.
This results in massive economic growth.
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Research essay sample on Economic Growth Economic Recession
