GDP

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  • Created by: Ellie
  • Created on: 01-02-15 12:31
Define Economic growth
The increase in productive capacity in an economy
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What is the trend rate of economic growth?
The average sustainable rate of economic growth over a period of time it is between 2.5 and 2.75%
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What is a recession?
Where real GDP growth is negative for at least two consequitive quaters
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What is a Boom?
A period where real GDP roses ata faster rate than assumed growth in productive capacity
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What is a recovery/upturn?
When Real GDP is positive, rising but below the long run growth rate
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What is a slowdown/downturn?
When Real GDP is positive but falling and below the long run growth rate
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Define Supply side policies
Policies that aim to increase the long run average trend level of growth showing an increase in productive capacity.
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Define demand side policies
Policies such as fiscal and moneytary measures that are used to control actual GDP and take a short term approach to macro economic policy.
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What factors help towards a recovery?
Falling interest rates, falling unemployment, low inflationary pressures, strong housing market and strong stock market.
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What caused the recession in 2008?
Financial crisis, increased borrowing costs, tightening of acces to finance, falling house prices, stock market losses, high levels of debt, raising oil prices
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What is the impact of a recession?
high unemployment, less job vacancies, falling living standards, high demand for higher education, falling inflation, depreciation in sterling, pressure on governments budgetary position
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What moneytary measures control the level of aggregate demand?
cuts in the interest rate, increased quantatitve easing, acceptance of the fall in the value of sterling
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What fiscal measures control the level of aggregate demand?
cuts in taxes, increasing other taxes such as tor rate of income taxes, higher government spending
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What are the advantages for firms in a recession?
Low wage inflation, larger pool of available workers, high demand for inferior goods, higher domestic demand if currency depreciates
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What are the disadvantages for firms in a recession?
Lower demand, negative equity and possible bankrupcy
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What are the advantages for households of a recession?
Lower Borrowing cost and mortgage repayments, lower income tax, cheaper goods and services
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What are the disadvantages for households in a recession?
Falling real income, More expensive imports and foreign holidays, threat of unemployment
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Other cards in this set

Card 2

Front

What is the trend rate of economic growth?

Back

The average sustainable rate of economic growth over a period of time it is between 2.5 and 2.75%

Card 3

Front

What is a recession?

Back

Preview of the front of card 3

Card 4

Front

What is a Boom?

Back

Preview of the front of card 4

Card 5

Front

What is a recovery/upturn?

Back

Preview of the front of card 5
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