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What is the definition of economic growth?
What happens when the rate of economic growth increases faster than the population growth rate?
What is the term used to describe the phenomenon of a nation's production possibility frontier (PPF) shifting outward?
What is the main argument of critics of economic growth?
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What is the term used to describe the periodic fluctuations of national output round its long-term trend?
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What is the first phase of the business cycle?
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What is the benefit of economic growth according to most economists?
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What is the characteristic of economic growth?
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What happens to the gap between actual and potential output during the phase of rapid economic growth?
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What is a characteristic of business cycles in practice?
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What is the major determinant of variations in the rate of actual growth in the short-run?
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What happens to the rate of growth of actual output when spare capacity has been used up?
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According to the classical view, what causes business cycles?
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What is required for an increase in a society's standard of living?
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What is the effect of an increase in the labour force on aggregate output?
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What is the third key factor that contributes to an increase in real per capita GDP?
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What is the term for the highest level of output that an economy can produce?
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What is the phase of the business cycle characterized by a slowdown or cessation of growth?
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What happens to output per worker when the number of workers increases?
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What is the consequence of diminishing returns in agriculture according to early economists?
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What happens to labour productivity when capital increases?
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What is human capital?
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Why do college graduates tend to get higher incomes than those who have not attended college?
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What is essential for continued economic growth?
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What is the relationship between the growth rate of equipment and the growth rate of structures in modern economies?
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What happens to the output of food per capita according to early economists?
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What is the effect of adding more capital to a given amount of labour?
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What is the term for the change in output with a given increase in one input, holding the other inputs constant?
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What is the expected outcome of poverty rates in Sub-Saharan Africa by 2015?
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What is a major challenge facing Sub-Saharan Africa?
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What is a positive trend observed in education in Sub-Saharan Africa?
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What is a major health concern in Sub-Saharan Africa?
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Which countries have achieved some success in reducing poverty?
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What is the average per capita growth rate expected in Sub-Saharan Africa between 2006-2015?
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What is the expected outcome of health services in Sub-Saharan Africa over the next 20 years?
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What is the current poverty rate in Sub-Saharan Africa?
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What is one way technological change has increased productivity?
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What is an example of an innovation that has increased productivity in the manufacturing sector?
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What is one benefit of economic growth?
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What has been the result of economic growth in terms of automobile emissions?
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What has been the trend in real per capita GDP in the USA since 1950?
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What is one way that increased real per capita GDP can help those who are less fortunate?
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What is one advantage of having more savings due to economic growth?
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What is an example of how innovation has affected productivity in the service sector?
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What is one way that economic growth has improved the quality of life?
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What has been the result of economic growth in terms of the ability to spare resources for those who are less fortunate?
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What is a consequence of economic growth and development?
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What is a criticism of economic development?
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What is a characteristic of developing countries?
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What is economic development?
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What is a consequence of the improvement in machinery and transportation in modern agriculture?
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What is a benefit of economic growth?
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What is meant by absolute poverty?
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What is the main goal of economic development?
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What is the relationship between economic growth and economic development?
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What is the current concern regarding economic growth and development in less developed countries?
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Study Notes
Economic Growth and Development
- Economic growth is the annual rate of increase in total production or income in an economy.
- It occurs when a nation's production possibility frontier (PPF) shifts outward, resulting in an increase in per capita GDP and an improvement in the standard of living.
- Economic growth is beneficial to a society as it enhances the material well-being of the population, but critics argue that it destroys the environment, erodes traditional ways of living, and impoverishes the spiritual well-being of the nation.
The Business Cycle
- The business cycle refers to the periodic fluctuations in national output around its long-term trend.
- It has four phases: upturn, expansion, peaking out, and slowdown or recession.
- The length and magnitude of these phases are irregular, meaning that booms and recessions can vary in duration and intensity.
Causes of Fluctuations in Actual Growth
- In the short-run, variations in aggregate demand (AD) are the major determinants of fluctuations in actual growth.
- A rapid rise in AD will stimulate firms to increase output, reducing slack in the economy, while a reduction in AD will lead to reduced output.
- In the long-run, the growth of AD and potential output determine actual growth.
Views on Business Cycles
- There are three views on the causes of business cycles:
- Classical view: the economy is inherently stable, and business cycles are caused by exogenous disturbances.
- Keynesian view: the economy is inherently cyclically unstable, and business cycles are endogenous to private market economies.
- Structuralist view: business cycles are random occurrences.
Sources of Economic Growth
- An increase in the labour supply will lead to an increase in aggregate output, but may not necessarily lead to an increase in output per worker due to diminishing returns.
- Increases in physical capital will also lead to increased output, but are subject to diminishing returns.
- Increases in human capital, such as education and training, are crucial to economic growth and increases in productivity.
- Technological change and innovation increase productivity and are essential for continued economic growth.
The Pros and Cons of Growth
- The pro-growth argument: economic growth has led to significant improvements in living standards, increased spending power, and the ability to help those less fortunate.
- The anti-growth argument: economic growth comes with costs, such as changes in traditional ways of living, increased environmental pressures, and negative consequences for some sectors of the economy.
Economic Development
- Economic development refers to the improvement of living conditions in less developed countries, characterized by low per capita income, poor health, low literacy rates, and malnutrition.
- Economic development involves economic growth, reduction of inequality, and the eradication of absolute poverty.
- Sub-Saharan Africa is a region with significant development challenges, including slow growth, high poverty rates, and poor health outcomes.
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Description
This study unit discusses two essential macroeconomic concepts, economic growth and development, and their distinctions. Learn about the definitions and importance of these concepts.