HASS Y10 - Economics Pt2

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Economic Growth

The increasing ability of a nation to satisfy the needs and wants of its people over time, which reflects the size and health of the economy

Impacts of Economic Growth

• Level of Income: Higher growth usually means higher income

• Consumption: Increased growth usually means more spending/buying

• Ability to Satisfy Needs and Wants: Increased growth usually means better living standards and overall well being, plus having more money to spend on products

• Quality of Life: income levels increase the quality of day-to-day products

• Living Standards: By being able to satisfy needs and wants, quality of life is enhanced

The Key Sectors Economic Growth Affects

• Consumers/Households

• Producers/Firms

• Government

How Economic Growth Affects Consumers/Households

• More jobs are created

• Most workers receive more hours of work and higher pay

• Higher pay leads to more spending

• Allows more wants to be bought, meaning better living standards

• Households become wealthier, share and house prices rise

How Economic Growth Affects Producers/Firms

• Increased demand for good and services leads to higher production

• More production means more workers needed

• Many businesses get high profits and revenues

• More stores and machinery and invested in

• Share prices for businesses rise

How Economic Growth Affects the Government

• Higher tax revenue from GST, income, and company taxes

• Less money is spent on welfare services and unemployment benefits

• More money is spent on quality of life like education, healthcare, transport, etc.

Optimal Economic Growth

3-4% per year

Effects of Low Economic Growth too low

• Less demand for goods and services

• Unemployment rates high

• Lower business investments: Businesses will generally invest less in expansions, innovations or risky projects, creating less jobs

• The Government receives less tax: with less workers comes less taxpayers, also affected by the gov investing in less projects that require hiring others (creating less jobs)

• Less Consumer Confidence: consumers will generally spend less and save more, reducing demand and thus jobs

Effects of Economic Growth too high

• Inflationary pressures: high inflation can occur, due to higher demand than supply, lowering value of money

• Resource Depletion and Environmental Damage: natural resources can be overused with rapid growth, causing damage to biodiversity and the environment, + pollution

• Increased Inequality: economic growth may be focused on one group, not on all of society, increasing inequality between the two groups

• Strain on Infrastructure and Institutions: the capacity of infrastructure (houses, roads, etc.), and institutions (legal and regulatory frameworks, etc.) can struggle, causing inefficiencies, shortages, and systemic breakdowns

GDP

Stands for Gross Domestic Product, measures the total value of all goods and services produced in a country in a given time

GDP per capita

The GDP divided by the population, which represents the average standard of living and wealth each person should have. The higher this is, typically the higher standard of living

How GDP influences decisions for Consumers

The employment rates and levels of income affect the value of money (purchasing power), encouraging a person to spend more

How GDP influences decisions for Producers

Decisions on investments and profitability are linked to GDP growth

How GDP influences decisions for the Government

GDP influences level of policies and public spending

Sustainable Economic Growth

The level of economic growth which minimises or removes negative consequences of growing too fast or too slowly, and is the level of 3-4%

Labour Productivity

The amount of goods and services a worker/workers produce in a given amount of time

Capital Productivity

The amount of goods and services that can be produced using a fixed amount of capital in a given amount of time

Capital

Things like machinery, computers, tools, mines, etc. which are used in the production of a product

How Capital Productivity can be Increased

• Improving tech (using most advanced equipment to save time and cost)

• Improving processes (improving production to be more efficient and taking less time, though still being effective. At best, these should organise time, resources, and storage to lower costs)

How Labour Productivity can be increased

• Improved Management Practices

• Training

• Workplace Culture and Flexibility

• Appraisal and Feedback

• Incentives

Improved Management Practices

A method of improving labour productivity, by making sure managers have the right attributes to lead. Managers should know much about the business, be able to relate well with their employees, and be positive and effective leaders

Training

A method of improving labour productivity, in which new employees effectively have their skills and knowledge developed. Generally involves educational training in things like schools, and extra training at the workplace

Extra Trainings New Employees May Go Through

• On the job training, where workers learn skills by performing the task

• Formal training sessions, where workers learn skills and knowledge in organised training sessions with an instructor

• Job rotation, where a worker rotates between performing different roles in a workplace, preventing boredom and broadening skills

• Mentor Programmes, where more experienced workers guide, support, and show new workers the skills and knowledge needed

• Secondment, where an employee is contracted to go to a different organisation to share their skills and knowledge

Workplace Culture and Flexibility

A method of improving of labour productivity, where the culture of the workplace should be positive, giving the employees stronger work ethics. Having flexible hours and work locations can improve work ethic as well

Work culture

The work ethic, values, attitudes, and environment of workers in a workplace

Appraisal and Feedback

A method of improving work productivity, in which positive and constructive feedback is given to workers. This results higher productivity in workers. This can be done regularly, or in a more formal way through appraisals

Appraisals

A written document required in some companies, where the coworkers and managers of an employee note the employee’s strengths and weakenss

Incentives

A method of increasing labour productivity, where something is used to encourage worker productivity, like extra money, holidays/paid leave, shares, etc.

Productivity

The measure of what can be produced (output) with a given amount of resources (input)