* RGDP : of national output

value an
economy's

Sig S
that has been adjusted for inflation.
I concept , diagrams , example
China Pem , Venezuela ,
,
Argentina
Refers to an increase in a
country's real gross domestic (RGDP) over time
. (For two consecutive quarters)
↳ sustained increase in the potential productive capacity of the economy
. J quality andlor quantity of Fop
of economic activity declines Crecession or slump in .c)
B
↳ Negative economic growth : Economic downturn
, level

MASONS of Differences
between GROWTH rates

MostImportant in
Factor Ereforments Size and Skills of Labour force
↳ most practical
for people to
way
have a

higher standard of
Highly skilled workforce contributes to
Living
Quantity or quality of a country's FoP .

economic . For
growth instance large
supply)
,

(USA , Saudi Arabia endowed in oil

Labour force in China =
economic growth .

the
The more factor resources a country has

Discovery
economic growth
.
of Raw Materials
more likely to achieve

Investment Expenditure Discovery of any tradable commodities

Coil , metals , etc)
. PPC outwards

↳ In capital a human resources

,
country's
Mobility of Laboyn
boosts productive capacity
.

Greater proportion of GDP in FDI

stimulates economic growth and development . Extent : workers willing and able to

change jobs and locations for employment.

Labour Productivity ↓ (occupationally and geographically able)
= economic growth
Output produced in a given time period

Factors : experience , training skills Investment , .

in education and
training = economic growth
.

Representing
enomic growth is RGDP increases Current Level/Actual
level of national income
growth)
Economy operates below its full employment but moves towards its potential
short-run
CDP
-
level of by using more resources
efficiently
.
④ AD-AS diagram ② Business cycle ③ Production possibility
curve
DL E SRAS Potential

n
capacity

good
maximum
RGDP f -to
? Output

/lapape
the
produce by
f
·

-o
B economy
O A * using previously
D
time
Ye Y2 REDP unemployed
Boom and recovery
resources
DL E
SRAS Services
------------
Pr SRASS Increase quantity Fop
quality of in the long
1/
in or run .

P2 Long-run
(employment , economic
-

growth)
&

Ye Y REDP ④ AD-AS diagram ② Business cycle ③ Production possibility

curve
PL *
LRAS
* Rightwards of AD LRAS2 RODP A * Outwards shift
curve and SRAS curve

reduce pot 2 Good (discovery)

stime
costs of
output 1

PPC 2
Living
AD
PPC
PREDD ,

* Increase in labour supply , > Services

in
improvement technology.
MEASUREMENT 3
Need to establish a base year of analysis

nominal GDP-inflation effect = Real GDP

Final-Initial 2nd year- 1st

RATE =%
-
year
Real GDP GROWTH >
-
- - 100 (percentage)
Initial 1st year
Takes account of fluctuations -
Example
·

:
in
prices (inflation) RGDP
Formula :
STEP 1
RGDP
formula
Adjusted for inflation by using GDP deflator

STEP 2
practice
Growth
rate
-

formula
zo
=>
oe
Nominal GR %

-nezoxnoogonaReaooo2sNoma a

both (positive and negative)

consequences
④ Impact on
living standards

to meet their needs and wants

to spend more
>
-
Higher real income enables people

Impacts
· Reduction or elimination of poverty , as more
people able to purchase basic goods
.

and encourages investment

Creation
·
of new jobs and lower unemployment ,
raise
consumption

fund + ment and services (in long run = economic growth)

·
Increased tax revenues , enables government to goods
↳ (expenditure & income) + enomic activity
Increased greater profits increase capital stock to
expand productive capacity.
consumer
spending , higher
·
sales revenue and ,

POV : firms
· Increased income levels , tend to a rise in dement goods (tobaco , alcohol)
POV : consumers
· Risk of inflation, owing to excessive aggregate demand, danger of demand-pull inflation , rising prices (decline of
economy)
② Impact on the environment >
- Create regative externalities

road congestion , climate change ,

land erosion , loss of biodiversity
·
Problems : air pollution ,

equities
·
Creation of market failures : resource depletion (deforestation) - threatening intergenerational

through environmentally sustainable methods

=
green
GDP (taking account environmental damage)

③ Impact on income distribution is Creates greater disparities in the distributions of income and wealth

·
Widens the gap between poor and rich

·
Howers with tax
revenues, government can use to redistribute income and wealth in the economy
.