the annual rate of increase in total production or income in the economy. Economic growth: the annual rate of increase in total production or income in the economy. Production/income measured in real terms. Figures adjusted for population growth. (per capita)

Non-market production  Difficulty measuring value of activities not sold in a market.  E.g production by government (valued at cost)  Farmers’ consumption of their own produce. Unrecorded activity Known as…  Unrecorded, underground economy, shadow economy & informal sector  E.g smuggling, drug-trafficking and prostitution.

Data revisions  Original estimates frequently adjusted. Economic welfare not accounted for  Negative externalities  Difficult to account for changes in quality  Distribution of production and income

Calculated on an annual basis. To calculate economic growth in 2008 = real GDP for 2008 x 100 real GDP for

Different schools of economic thought…. The classical economists Believe that economies are inherently stable. Fluctuations are temporary caused by exogenous factors William Stanley Jevons “sunspot” theory of the business cycle. Believe gov. should leave market system to its own devices - market forces will sort out economic problems Different schools of economic thought…. The classical economists Believe that economies are inherently stable. Fluctuations are temporary caused by exogenous factors William Stanley Jevons “sunspot” theory of the business cycle. Believe gov. should leave market system to its own devices - market forces will sort out economic problems

Keynesian Economists Believe business cycle caused by endogenous factors. Governments have a duty to intervene in the economy. Keynesian Economists Believe business cycle caused by endogenous factors. Governments have a duty to intervene in the economy.

Business conditions improve Reinforced by multiplier. Strong upswing results Interest rates, & imports increase. Peak reachedDecline begins Interest rates, & imports decrease. Trough reached

Structuralist or Institutionalist Explanation Fluctuations caused by structural/institutional changes. Market system NOT inherently stable or systematically unstable. In SA’s case… the oil shocks of the 1970 the imposition of trade and financial sanctions the political unrest and uncertainty of the 1980s the political transition of the 1990s changes in technology and production techniques. Appropriate policy will vary from time to time. Structuralist or Institutionalist Explanation Fluctuations caused by structural/institutional changes. Market system NOT inherently stable or systematically unstable. In SA’s case… the oil shocks of the 1970 the imposition of trade and financial sanctions the political unrest and uncertainty of the 1980s the political transition of the 1990s changes in technology and production techniques. Appropriate policy will vary from time to time.

visual business cycle Based on the information on the next slide, you need to produce a visual business cycle of South Africa. Your presentations will be judged on… Creativity Economic knowledge Accuracy Presentation