Economic Growth
淘宝运营Aim:
1. Economic Growth: can be defined as an increa in the potential output an economy can produce.
2. Long run economic growth and short run economic growth
Figure 1 PPF
Short run economic growth：is an increa in the output that results from making u of spare capacity is shown by the movement from point C inside the economy’s production possibility frontier, located at PPF1, to point A on the frontier. Short run economic growth make u of spare capacity and take up slack in the economy.
Long run economic growth is shown by an outward movement of PPF from PPF1 to PPF2 俶which increas the potential output the economy can produce. Long run growth increa
s total productive capacity. It’is possible for the potential growth to occur without actual growth taking place for example, the labour force of a nation may increa due to immigration, but there is no demand for this factor, output will not ri. 麻烦的反义词
If an economy is operating below its potential output, an increa in aggregate demand will cau a ri in equilibrium national output. Figure 2 shows an increa in aggregate demand leading to a ri in real GDP from Y1 to Y2.
美女性感泳装Long-term economic growth requires a rightward shift in the aggregate supply curve, As shown in Figure 3, If economic is producing on long run aggregate supply curve LRAS1. As there is no longer any spare capacity in the economy, for further growth to occur both aggregate supply curve LRAS1 and the production possibility frontier must shift to the right, a shift to the right of the LRAS curve from LRAS1 TO LRAS2 means that full employment level of output incread from y2 to y3.
3. The cau of economic growth
(1). Economic stability and macroeconomic policies
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Stability, particularly of growth of aggregate demand, backed by nsible government policy generates the ideal environment for business investment. Firm are more inclined to produce more goods and rvices and expand their operation if they expect demand to ri at a strong stable rate. Fluctuations in demand lead to business uncertainty about future prospects for revenue and profitability. Government macroeconomic policies may thus aim at promoting stability and economic growth.
(2). Increa labour activity/participation
Economic growth requires an increasing percentage of the population to be actively employed, that is ,participating in labour market and successfully in finding work. Factor that has led to increa in the activity rate include
-more relaxed social attitudes to women working
-incentives in tax system, working tax credit
-retraining schemes to overcome occupational flexibility
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Evaluation
Simply increa the size of population may increa GDP but it won’t increa GDP per capita. Indeed countries with rapidly growing populations can suffer falling living standards for a long time since children consume goods and rvices without producing them. 三国曹丕
(3).immigration
Increasing activity rate cannot boost economic growth indefinitely. An economic will eventually reach the point at which the activity rate can’t increa any further, All developed Economies are experiencing aging population, with an increasing percentage of the population being of retirement age, which places a burden on tho of working age. Inward immigration of workers is potential source of economic growth. It can ea labour shortages.
(4).increasing labour productivity
Labour productivity measures output per worker per hour. It is widely accepted that labour productivity is the key to achieving high long term growth rate.
(5).educational training
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Many unemployed people lack the skills required to cure a job. Government provision of training opportunities can help to tackle wider skills shortage in the economy, leading to a more flexible mobile labour force. An educated and skilled workforce will be more productive and help generate economic growth.. which also help to improve country’s international competitiveness.
Disadvantage: investment in education and training is unlikely to yield immediate improvement in growth prospects
(6).Investment
Investment is made up of replacement and new investment. Replacement is depreciation Gross investment includes replacement and new investment. So an increa in investme
nt will lead to outward shift of AD curve. Furthermore Investment is an injection of circular flow of income. An injection into the economy will cau multiplier effect to operate and that the increa in national income is likely to be larger than the initial injection. Thirdly Investment is a crucial source of labour productivity growth Also investment will promote R&D. It allows labour to work with more and better capital equipment, using the latest technology which will reduce the unit cost per labour per output and promote dynamic efficiency, leading to a rightward shift of AS curve. From Figure 1 blow. Initially the macroeconomic equilibrium is A with output Y1 an increa in demand and supply will lead to a higher equilibrium level of output from Y1 to Y2. Hence increa our competitiveness in international market.
4. Advantage and disadvantage of economic growth
Increa in quantity and quality of factors of production
(1).the obvious benefit of economic growth is a ri in the material standard of living of houholds. Increasing real GDP per capita means that, on average, the population c
an enjoy more goods and rvices.
(2).Economic growth produces a ‘fiscal dividend’ namely the tax revenues that growth generates. Economic growth rais the tax revenue without having to rai tax rate, as national income increas, and some of this can be ud to finance schemes to help poor. Incread tax revenue can also be ud to correct market failure such as provide important public and merit goods. Such as policing and health care as well as to correct negative spillover effects upon environment
(3). Economic growth provides a route out of poverty. It enables a country to reduce,eliminate
