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Questions and Answers
What is the definition of economic growth?
What is the definition of economic growth?
- The decrease in the output of goods and services of an economy in a period of time
- The increase in the output of goods and services of an economy in a period of time (correct)
- The fluctuation of the output of goods and services of an economy in a period of time
- The stabilization of the output of goods and services of an economy in a period of time
What does Nominal GDP represent?
What does Nominal GDP represent?
- The increase in GDP per capita
- The total value of goods and services produced in an economy for a period adjusted for inflation
- The number value calculated as price times quantity for the goods produced in the economy during the period (correct)
- The total value of goods and services produced in an economy without adjusting for inflation
What does Real GDP represent?
What does Real GDP represent?
- The increase in GDP per capita
- The number value calculated as price times quantity for the goods produced in the economy during the period
- The total value of goods and services produced in an economy without adjusting for inflation
- The total value of goods and services produced in an economy for a period adjusted for inflation (correct)
What are the components of Aggregate Demand (AD)?
What are the components of Aggregate Demand (AD)?
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What is the derived demand for labor based on?
What is the derived demand for labor based on?
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Explain the difference between nominal GDP and real GDP.
Explain the difference between nominal GDP and real GDP.
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Why is economic growth important for an economy?
Why is economic growth important for an economy?
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What are the components of Aggregate Demand (AD)?
What are the components of Aggregate Demand (AD)?
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What is the formula for Aggregate Demand (AD)?
What is the formula for Aggregate Demand (AD)?
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Explain the concept of derived demand for labor.
Explain the concept of derived demand for labor.
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Study Notes
Economic Growth
- Economic growth represents an increase in the production of goods and services in an economy over a specific period. It's typically measured by the percentage change in real gross domestic product (GDP).
Nominal GDP vs. Real GDP
- Nominal GDP measures the total value of goods and services produced in an economy at current market prices. It includes the impact of inflation.
- Real GDP measures the total value of goods and services produced, adjusted for inflation. It provides a more accurate representation of changes in output.
- The difference: Nominal GDP reflects both changes in quantity and prices, while real GDP isolates the change in quantity.
Components of Aggregate Demand (AD)
- Aggregate Demand (AD) is the total demand for goods and services in an economy at a given price level.
- It consists of Consumption (C), Investment (I), Government Spending (G), and Net Exports (NX) (Exports - Imports).
- Formula: AD = C + I + G + NX
Derived Demand for Labor
- Derived demand for labor means the demand for labor is driven by the demand for the goods and services labor produces. If demand for a product increases, the demand for labor to produce that product also increases.
- It isn't a direct demand for labor itself, but rather an indirect demand based on the market need for the product or service.
Importance of Economic Growth
- Economic growth leads to higher incomes and improved living standards.
- It increases job creation and reduces unemployment.
- It strengthens a nation's international competitiveness and global influence.
- It facilitates investment in infrastructure and technological advancement, leading to greater productivity and future growth.
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