Ch 21 - Macroeconomic objectives: economic growth

Household income

Household income

________: rising GDP means that people afford to buy more goods and services.

Economic growth

________: a increase in real GDP over time.

Economic growth

a increase in real GDP over time

Deflationary gap

may be the result of a fall in economic growth or negative economic growth in the short run, and may be solved using demand management policies

Household income

rising GDP means that people afford to buy more goods and services

Short run in macroeconomics

Is the time period when the economy can change but the cost of production is held constant

Long run in macroeconomics

time period when the price level in the economy can change and the cost of factors of production can change

Short run in macroeconomics

Is the time period when the economy can change but the cost of production is held constant

Actual output of the economy

is the level of output the economy archives with its current resource utilisation

Actual output will increase if

There is an increase in AD, firms produce more, increases the utilisation of available resources

Long run in macroeconomics

time period when the price level in the economy can change and the cost of factors of production can change

Change in actual output

When there is economic growth in the short run

Positive consequences of economic growth:

• Reduced poverty

• Greater employment

• Availability of goods and services

Growth rate formula

Growth rate = real GDP in Y1 - real GDP in Y2 / real GDP in Y1 * 100

Growth rate

the percentage change in the value of all of the goods and services produced in a nation during a specific period of time, as compared to an earlier period.

Negative consequences of economic growth

• Decreased sustainability

• Income disparities

• Inflation

• Balance of payments

economic growth

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