21(1) Economic Growth

Economic growth

Increase in the amount of goods and services produced per head of the population over a period of time.

Causes of economic growth

Discovery of natural resources, investment in capital or infrastructure, technical progress, and relocation of resources.

National output

Total value of output of goods and services produced by a nation.

Benefits of economic growth

Increased employment, output, sales and profits, income, expenditure, low and stable inflation, and increased tax revenue.

GDP

Gross domestic product is the total market value of all final goods and services provided within an economy by its factors of production over a given period of time.

Drawbacks of economic growth

Unemployment, depletion of natural resources, inflation, widening income inequalities, and negative externalities.

Nominal GDP

Value of output produced measured at their current market value.

Real GDP

The total market value of all final goods and services produced within a country in a given period of time, adjusted for inflation.

CPI

Consumer Price Index is a fixed basket of goods used to measure inflation.

GDP per capita

Average output income per person in an economy, calculated as GDP divided by population.

Inflation rate

Percentage change in prices, calculated as (new-old)/old x 100.

Recession

Negative economic growth causing a fall in real GDP and real wages.

Financial crisis

A severe disruption in the financial system causing a fall in business/consumer confidence, cut in production, cut in government spending, and a fall in consumption.

Trade wars

Conflicts between countries involving tariffs and trade restrictions, leading to a fall in real GDP and a rise in interest rates.