Chapter 17: Economic growth and the economic cycle

What is meant by the term ''economic growth'' ?

What is meant by ''GDP''

What is GDP per capita ?

Define short-run economic growth

Define long-run economic growth

How is short-run economic growth shown on a production possibility frontier ?

How is long-run economic growth shown on a PPF ?

Define potential growth

Define actual growth

Define nominal growth

Define real growth

What is the 'output gap'

How is economic growth measured ?

Define real national output

How can real national output be calculated ?

What does an increase in real national output imply ?

Define NOMINAL national output

What is the calculation for the approximate change in real national output ?

The change in real national output measures what about the economy ?

The change in NOMINAL income does what about the growth rate ?

Define national income/ national output

In order to produce the flow of national output, the economy must possess what ?

What is national capital stock ?

Define social capital

What happens to national capital stock over time due to capital consumption ?

How do we maintain the size of the capital stock so that the stock is capable of producing exactly the same size of national income the following year ?

What is the consequence of not spending on replacement investment ?

What does positive economic growth generally require from investment ?

What is net investment ?

Define gross investment

What are the 2 main things that net investment causes ?

How is negative economic growth expressed ?

Define gross national product

Define gross national income

What is net income from abroad ?

What is included in GNI but excluded from GDP ?

Which is a better measure of standard of living of UK residents, GDP or GNI ?

Which is a better measure of productivity ? GDP OR GNI ?

Is net income from abroad usually positive or negative ? What does this show ?

Which is usually larger, GNI or GDP ?

For most developing countries, which usually exceeds the other ? GDP or GNI ?
Why ?

Sum up the main differences between GNI and GDP

How can market price data (nominal data) be turned into real data, for example, to show real GDP ?

The rate of growth of an economy depends on what 5 main things ?

Explain the endogenous growth theory

What is a better measure of improved human happiness than economic growth ?

Economic development is measured by:
(4 marks)

Define resource depletion

Define resource degradation

Define sustainable economic growth

What are the main benefits of economic growth ?
( 2 marks )

What are the main problems with economic growth
( 5 marks )

What is the main trade-off in terms of maximising the economy's growth rate, measured by GDP Growth ?

What are the 3 main components of economic welfare ?

What two measures of economic growth are usually used to measure standards of living ?

GDP and GNI only capture which of the 3 components of standard of living ?

What are the main positive externalities provided by the environment ?
( 3 marks )

What are the some of the main negative externalities of the environment ?
(4 marks)

If the pursuit of economic growth leads to the destruction of positive externalities of the environement, this is an example of what situation ?

A welfare loss may be shown as an increase in national output, what does this falsely indicate ?

Give an example of when an increase in national output might ignore a welfare loss

How does the extra time motorists spend in traffic hams caused by increased traffic congestion contribute to economic growth ?

What are 'regrettables' ?

What is exponential growth ?

What might limit a government's ability to achieve high employment levels and continuing economic growth ?

What was the 1970s gloomy prediction of how the world would be running out of oil

Draw a typical economic cycle

What is the economic cycle ?

Fluctuations in economic activity occur in which 2 main ways ?

What are seasonal fluctuations largely caused by ?

Cyclical fluctuations divide into what categories ?

Long cycles are caused by what main factors ?

In an economic cycle, what fluctuates considerably from year to year ?

Economic cycles, between 4 and 12 years, are caused primarily by what ?

From an economy's trend output, what can be calculated ?

What rises and falls in the different phases of the economic cycle ?

Define short-term growth

What happens in a cycle's upswing ?

What is the economy's trend (potential) growth rate ?

Before 2000, the UK's trend growth rate was judged to be about what ?

Although a 2.25% growth rate seems low, why is it good compared to NICS such as China ?

What effect ensures that a 2.25% growth rate meant that average UK living standards doubled every generation or so?

What effect explains why the trend output line becomes steeper from year to year, moving along the line ?

Define recession

Before 2008, how many recessions had there been in the UK since the 1970s ?

Both recessions raised unemployment to what figure ?

Both recessions were followed by what periods in the rest of the 1980s and 1990s ?

What are the characteristics of a recovery

What are the characteristics of a boom ?

What are the characteristics of a recession ?

What are some causes of a recession ?

What is a doubled-dip recession (W RECESSION) ?

What is a U shaped recession ?

What is 'flat-lining' ?

What is the UK government's definition of an economic cycle

What was 2002 and 2007 the tail end of ?

When did the mild cycles of most of the 1990s and the early 2000s end ?

What were the main causes and characteristics of the 2008 recession ?

What is a 'growth recession' ?

What is an output gap ?

What is a negative output gap ?

What is a positive output gap ?

What can be used to illustrate output gaps ?

How can a negative output gap be illustrated on a production possibility frontier ?

How can a positive output gap be shown on a PPF ?

Why cant a point beyond the PPF be sustained for long ?

With a point beyond the PPF, what should happen ?

What is the multiplier effect ?

What is the accelerator effect ?

Give an example of an injection of demand into the circular flow of income causing a multiplier effect

Each time, what is the extra spending and income in terms of the previous addition to the circular flow of income ?

In the 1930s, John Maynard Keynes suggested the concept of the multiplier process to be what ?

Explain how the Multiplier effect is a 'demand-management approach''

What are the main factors which affect the value of the multiplier effect ?
( 2 points )

The multiplier effect requires what for extra output to be produced ?

What ensures the full multiplier effect occurs in terms of AD/AS and elasticity ?

When will the multiplier effect be larger ?

What is one of the problems with the multiplier effect ?

What can limit the initial impact of spending projects ?
(2 MARKS )

What is the calculation for the value of the multiplier ?

Explain the role of speculative bubbles contribution to economic cycles

Explain the political reasons behind the economic cycle

Explain how outside shocks hitting the economy contribute to the economic cycle

Explain how the inventory stock cycle contributes to economic cycles

To help economic growth, what might the government do ?

Explain how climatic cycles contribute to the economic cycle

Explain how marxist theory contributes to the economic cycle

Explain how the multiplier/ accelerator model contributes to the economic cycle

What can be used to try and reduce fluctuations in the economic cycle ?

In the Keynesian era, what was used to reduce fluctuations in the economic cycle ?

During the Monetarist era in the late 1970s and early 1980s, what was abandoned ?

Abandoning demand management during the monetarist era arguably did what to the recession at the beginning of the 1980s ?

Since the end of the 1992 recession, what has been used successfully to stabilise the economic cycle ?

In a boom, when the economy is overheating, what does the Bank of England do ?

In a downturn, what does the Bank of England do ?

What is required for successful stabilisation of the economic cycle ?A

If monetary policy is used to stabilise the economic cycle, how and when should interest rates be used ?

What is the danger of bad timing in trying to stabilise the economic cycle ?

How might bad timing be responsible for extent of the 2008 recession ?

What is an overheating economy ? (boom)

What are the main causes for an overheating economy ?(boom)

What are the main characteristics of an economic boom ?
( 7 marks )

What is the UK trend rate / (economic objective) ?

How can interest rates be used to stabilise an economic boom ?

What is the issue with using interest rates to stabilise the economic cycle ?

How might taxes be used to stabilise an economic boom ?

DEFINE PRODUCTIVITY

What are the main measures of productivity?
( 3 marks )

Increases in productivity lead to what ?

Higher productivity helps to control what ?

Explain the difference between GNI and GDP

Explain two benefits and two costs of economic growth (12 marks)

'Some economists argue that recessions are necessary for restructuring the economy
Evaluate this view (25 marks)

Evaluate 3 policies the government could use to increase the economy's long-term rate of growth
(25 marks)