4.2 Economic Growth What is meant by economic growth and how can it be measured. Distinguish between GDP and GDP per capita

Key Terms p.54 Economic Growth Output is measured as GDP – this being the value of goods and services produced within the country in a year.

GDP per Capita GDP divided by the population. Average output (income) which each person in the country has.

The Causes of economic growth Investment Changes in technology Larger workforce Education & Training Natural Resources Government policies.

Reminder N – NON A – ACCELERATING I – INFLATION R – RATE U- UNEMPLOYMENT Issue between unemployment and inflation. Do we really want ‘full unemployment’ Unemployment 15%

Unemployment Inflation 15% 2% 10% 2.5% 7% NAIRU 3% 5% 6% 4% 10% The government would be happy with unemployment of 7% as after that inflation accelerates. The issue being the government can not always tell when inflation will accelerate until it already has.

Important economic theory. Ceterus Paribus - “all things remaining equally” In economics we have to assume that the judgements we make are done so, when all things are remaining equal. However other factors (people, time, circumstances) can change how policies may work. A policy that worked well last time may not always work well this time.)

See Production Possibility Curve.