Studied by 45 people
Economicsfokzofikgmfv
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)
Note
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