University:
Ridge Point High School
Course:
Algebra II
Academic year:

2020
Views:

356

Pages:

1
Author:

D. Marsden

Week 17Explain the term Economic browth and analyse two possible caused ofeconomic growth. (q Marks)Economic growth refers to the expansion in an economy's productive the capacity real national measured outputby the increase in real GOP over periods of time. This shows howincreases over time (whilst adjusted for engl lation).across as economy will encourage spending rather than saving applies for it consumersOne cause of economic growth could be the lowering of interest rates. This lower interest ratesas the reward for saving (interest) has been reduced and this applies for firms with this as Mean thecost of borrowing Many for investment (interest) has also been reduced. in and mind, it(the buying of capital goods). Consumption and investment are two of the key factors in aggregateis likely the economy would see an increase in consumption (consumer spending) investmentdemand whereby aggregate demand = consumption + Investment + Government spending +(Exports - imports). Such increased spending of consumers and firms will theyefore result inan outward shift in aggregate demand, as shows below:PriceLRAS SEASlevelThis shift in AD causes supply to have to increase to neutralisePL,the excess demand (rationing) in the economy. with this being said,PLreal national output consequently increases (4 to 4.) This provesthat lowered interest rates may cause an increase in real nationalAD,:ADoutput via a demand side shift further proving it to be a potential44, RealNationaloutputcause of economic growth.Another cause of economic growth can be the increase in quantity and quality y labour withinan economy An increase in the amount of labour in the labour force allow for more watters producingoutput and greater quality means better more efficient labour. This happen when more studentsfinish their academic courses and are available for work and insugation. Immigration yworkers leads to a greater labour force in the economy which contributes to on increase in real GDFurthermore, better qualification via education allows for a higher quality workforce. these improvementswith labour are sustainable way of expanding the long run productive capacity of on economyand this is shown by on outward shift in the LRAS cure below.PriceLPAS CRAS,level7SRA)The shift in LRAS shows that the full employment level of future ofproduction now allows for a greater amount of real national output and isevidence of an expansion of the productive capacity of the economy, thisADcausing economic growth (as a result of greater quantity and quality lades.).4" 4. RealNationaloutput

Week 17: Economic Growth

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