Page 1: Economic Growth

• Definition of 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

  • Relocation of resources (finding new)

• National Output: Total value of output of goods and services produced by a nation and calculated via availability of goods and services

• Benefits of Economic Growth:

  • Increased employment

  • Increased output (production)

  • Increased sales and profits

  • Increased income

  • Increased tax revenue

  • Improved infrastructure

  • Improved living standards

• Drawbacks of Economic Growth:

  • Unemployment

  • Depletion of natural resources

  • Inflation

  • Widening income inequalities

  • Rise in poverty

  • Negative externalities (e.g., pollution)

• Gross Domestic Product (GDP): Total market value of all final goods and services provided within an economy by its factors of production over a given period of time

• Calculations:

  • Nominal GDP: value of output produced measured at their current market value

  • Real GDP: value of output measured assuming the prices are unchanged

  • CPI (Consumer Price Index): measures the average output income per person in an economy = GDP/Population

  • Inflation rate: (new-old)/old x 100

• Positive Impact of Economic Growth:

  • Creating new job opportunities

  • Increasing living standards

  • Pulling people out of poverty