<3.3.1: ECONOMIC GROWTH>

• ECONOMIC GROWTH is defined as an INCREASE IN REAL GDP that an economy produces over a period of time, the MINIMUM OF TWO CONSECUTIVE QUARTERS (6MTHS+).

• An increase in an economy’s productive potential can be shown by an OUTWARD SHIFT in the economy’s production possibility frontier (PPF).

• [QUOTIENT RULE] If X = Y/Z then %ΔX = %ΔY - %ΔZ

• [PRODUCT RULE] If X = Y * Z then %ΔX = %ΔY + %ΔZ

Answer: LONG-TERM GROWTH and a rightward shift in the LRAS. This is because investing in research and development for new technology can lead to increased productivity, efficiency, and innovation in the economy, which can lead to sustained economic growth and a shift in the LRAS curve to the right.

Answer: Short-term growth caused by a rise in aggregate demand. This is because an increase in consumer spending will lead to an increase in demand for goods and services, but it is not a sustainable source of growth since it does not increase the economy's productive capacity or potential output.

Answer: Short-term growth caused by a rise in short-run aggregate supply. This is because the destruction of infrastructure will decrease the economy's productive capacity in the short run, but the rebuilding efforts can lead to a temporary increase in demand for goods and services and a rise in short-run aggregate supply.

4. The government invests in education and training programs to improve the skills and human capital of the workforce. Will this result in long term growth and a rightward shift in the LRAS, or short-term growth caused by a rise in aggregate demand, or short-term growth caused by a rise in short-run aggregate supply?

Answer: Long term growth and a rightward shift in the LRAS. This is because investing in education and training can increase the productivity and efficiency of the workforce, which can lead to sustained economic growth and a shift in the LRAS curve to the right.

5. A decrease in the price of oil leads to lower costs of production for businesses. Will this result in long term growth and a rightward shift in the LRAS, or short-term growth caused by a rise in aggregate demand, or short-term growth caused by a rise in short-run aggregate supply?

Answer: Short-term growth caused by a rise in short-run aggregate supply. This is because the decrease in oil prices will lead to lower costs of production for businesses, which can increase their profitability and temporarily increase the supply of goods and services in the short run.

6. The government increases spending on public infrastructure projects, such as roads and bridges. Will this result in long term growth and a rightward shift in the LRAS, or short-term growth caused by a rise in aggregate demand, or short-term growth caused by a rise in short-run aggregate supply?

Answer: Long term growth and a rightward shift in the LRAS. This is because investing in public infrastructure can improve the economy's productive capacity, increase efficiency, and facilitate economic growth over the long run, leading to a shift in the LRAS curve to the right.

7. A sudden increase in demand for a popular product leads to a temporary surge in production and employment in the industry. Will this result in long term growth and a rightward shift in the LRAS, or short-term growth caused by

Answer: Long term growth and a rightward shift in the LRAS. This is because investing in education and training can increase the productivity and efficiency of the workforce, which can lead to sustained economic growth and a shift in the LRAS curve to the right.

Answer: Short-term growth caused by a rise in short-run aggregate supply. This is because the decrease in oil prices will lead to lower costs of production for businesses, which can increase their profitability and temporarily increase the supply of goods and services in the short run.

Answer: Long term growth and a rightward shift in the LRAS. This is because investing in public infrastructure can improve the economy's productive capacity, increase efficiency, and facilitate economic growth over the long run, leading to a shift in the LRAS curve to the right.

• If REAL GDP GROwTH > POPULATION GROWTH, then GDP per capita will RISE, which indicates that there is a GREATER POTENTIAL FOR PEOPLE to INCREASE THEIR CONSUMPTION OF GOODS AND SERVICES, and IMPROVE THEIR STANDARD OF LIVING right?? 

• However, the extent to which economic growth will positively affect the average living standards for all will depend on the following factors

• This relates to how the gains in GDP are distributed. If they only end up in the pockets of a small % of the population, then economic growth has had little impact on the well-being of the average citizen.

• If the metric for measuring improvements in well-being is the greater ability to consume goods and services, then we can only say economic growth has achieved this if a larger portion of the growth has been in household spending ('C').

• The improvements in income and living standards that real growth brings, do not always get shared equally amongst the sexes. In fact, there are numerous indexes that show a clear disparity in favour of males.

• As output grows, so too does government revenues, as such governments have more funding for merit goods such as schools and hospitals, however, it remains to be seen what they prioritise.

• With higher incomes, comes the possibility of greater charitable donations and philanthropy, but again this is uncertain.

• Greater REAL GDP requires greater resource usage. Advocates of the 'Grow now, clean up later' way of thinking, are focused entirely on economic growth and greater incomes in the present, and thus resist any changes that may reduce costs such as the use of greener energy technology, or restricted yields to allow for regeneration. They stress that once incomes rise, and the technology cost lowers then they will be for full implementation.

• HOWEVER, you may have worked out that this way of thinking is futile if the resources being used are rivalrous such as the fish in the sea, and the clean air in the skies. Not only will they be lost forever, but its counter-productive, as this will seriously jeopardise future growth opportunities. ('Short-termism').

Sustainable economic growth means a rate of growth which can be maintained without creating other significant economic problems, especially for future generations. There is clearly a trade-off between rapid economic growth today, and growth in the future. Rapid growth today may exhaust resources and create environmental problems for future generations, including the depletion of oil and fish stocks, and global warming.

Periods of growth are often triggered by increases in aggregate demand, such as a rise in consumer spending, but sustained growth must involve an increase in output. If output does not increase, any extra demand will push up the price level. Both can be successfully pursued under certain conditions

1) Governments use carbon taxes to incentivise the more rapid adoption of cleaner technologies

2) Governments

3) 

4) Greater 

5) Use of new yardstick: 

GROWTH may lead to GREATER EQUALITY for the following reasons:

• The growth was achieved with the use of 'APPROPRIATE TECHNOLOGY', which allowed for integration between labour and capital-intensive production, without causing unemployment.

• The growth and resultant TAX REVENUES earned by the government are spent on IMPROVING HUMAN CAPITAL which allows more people to share in the benefits of economic growth.

• The growth and subsequent spending were not just are focused on the development of URBAN AREAS (often coastal) but also more RURAL areas.

GROWTH may lead to GREATER INEQUALITY for the following reasons:

• The growth was achieved through the use of MORE CAPITAL-INTENSIVE production processes at the expense of labour.

• The growth and resultant tax revenues earned by the government are NOT SPENT on improving HUMAN CAPITAL.

• The growth and subsequent SPENDING are FOCUSED on the development of URBAN AREAS (often coastal) whilst the rural areas are neglected

• The growth was achieved through GREATER TRADE LIBERALISATION and GLOBALISATION, which created both winners and losers, in particular, those formally protected and inefficient domestic industries and their employees suffered from the influx of cheaper substitutes.

• The growth was achieved through the PRIVATISATION of industries which left vulnerable groups, formally employed in the public sector, with low human capital and such as those in remote regions isolated.

• Go to ChatGPT and input the prompt below. once you have your tables copy and paste them onto a canvas  template.  

• Create a table titled 'NEGATIVE CONSEQUENCES of ECONOMIC GROWTH', then for each of the following indicators, HDI RANKINGS, INCOME EQUALITY, LIFE EXPECTANCY, GENDER EQUALITY, ENVIRONMENTAL DAMAGE, and one more indicator of your choice, identify an appropriate measure/index that can be used to measure them. Then identify a country for each indicator that exhibits a RISING GDP PER CAPITA but a WORSENING value/ranking in terms of one of the indicators.  For each country, identify the level of change in REAL GDP PER CAPITA over the past decade, then the level of change in the chosen measure/index over the past decade, and finally, provide a possible explanation as to why this may have occurred.

• Create a table titled 'POSITIVE CONSEQUENCES of ECONOMIC GROWTH', then for each of the following indicators, HDI RANKINGS, INCOME EQUALITY, LIFE EXPECTANCY, GENDER EQUALITY, ENVIRONMENTAL DAMAGE, and one more indicator of your choice, identify an appropriate measure/index that can be used to measure them. Then identify a country for each indicator that exhibits a RISING GDP PER CAPITA and an IMPROVING value/ranking in terms of one of the indicators.  For each country, identify the level of change in REAL GDP PER CAPITA over the past decade, then the level of change in the chosen measure/index over the past decade, and finally, provide a possible explanation as to why this may have occured.

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