Economic Growth GDP (Gross Domestic Product) GDP (Gross Domestic Product) Total Output = Total Production

Demand Policies Fiscal Policy and Monetary Policy attempt to regulate aggregate demand and as a result economic growth AD = C + I + G + (X-M) Shift AD curve to the right

Supply-Side Policies Attempt to increase efficiency and shift aggregate supply curve to the rightAttempt to increase efficiency and shift aggregate supply curve to the right

Causes of Economic Growth Factor endowment – Australia is has experienced economic growth because ……Factor endowment – Australia is has experienced economic growth because …… Labour force and productivity - Singapore has experienced economic growth because …..Labour force and productivity - Singapore has experienced economic growth because …..

More causes of Economic Growth More causes of Economic Growth Investment ExpenditureInvestment Expenditure Government SpendingGovernment Spending International TradeInternational Trade Domestic ConsumptionDomestic Consumption

Positive effects of Economic growth Increased real GDP, income and living standardsIncreased real GDP, income and living standards Decreased unemploymentDecreased unemployment Higher tax revenue and improved infrastructureHigher tax revenue and improved infrastructure Increased leisure timeIncreased leisure time Care of environmentCare of environment Increased savings and investmentIncreased savings and investment

Negative effects of economic growth Environmental consequences – use of resources and negative externalitiesEnvironmental consequences – use of resources and negative externalities InflationInflation Increased income inequalityIncreased income inequality Increased imports and trade imbalanceIncreased imports and trade imbalance

Business Cycle Draw Figure 20.2 page 221Draw Figure 20.2 page 221 Does the business cycle really look like this?Does the business cycle really look like this? Do all countries experience the same business cycle?Do all countries experience the same business cycle? Sometimes it is called the Economic CycleSometimes it is called the Economic Cycle

Conclusion If economic growth is always the answer. What are the questions? How can cyclical u be reduced?How can cyclical u be reduced? Why are imports > exports?Why are imports > exports? Why is the environment exploited?Why is the environment exploited? Why do interest rates increase?Why do interest rates increase? Why do interest rates decrease?Why do interest rates decrease? Why does inflation increase during a boom?Why does inflation increase during a boom? How do living standards increase?How do living standards increase?