Economic Growth

What is potential economic growth?

An increase in the productive capacity of an economy

What is actual growth?

When a countries output is rising it suggests that a countries citizens are experiencing higher living standards. This can be seen from a rise of real GDP from one time period to another

What is recession?

Where GDP falls for a period of 2 consecutive quarters

What are the 3 ways of measuring GDP ?

Output Income Expenditure

What is GNI

The total value of goods and services produced by UK citizens and firms. doesn't include the output of foreign owned firms in the UK

Why is GNI considered more accurate than GDP?

GDP is within borders GNI is value produced by all citizens Income flows between countries are growing

What is the value for converting nominal GDP to real GDP?

Real GDP = nominal GDP/price index x. 100

What is purchasing power parity ?

It takes into account that the cost of living is higher in some countries than others and therefore, the PPP is not equal. It converts the value of money into the same currency - usually the american dollar - to enable us to compare the GDP in different countries.

What are the main characteristics of a boom ?

Strong rising AD, Employment rises ,Gov tax revenues rise as spending rises, Cost push inflation

what are the main characteristics of a recession ?

Declining demand, Unemployment, Decrease in fixed capital investment, Increased government borrowing

What are the benefits of economic growth?

Higher living standards, Employment, Lower budget deficit, Health and education, Productivity

What are the (potential) costs of economic growth?

Inflation, Environment, Inequality