UK Economic

Performance

https://www.tutor2u.net/economics/reference/state-of-the-uk-econom
y-may-2018

https://www.tutor2u.net/economics/reference/20-key-facts-on-the-uk-
economy-in-2019
A gloomy outlook from PWC?
 Key Performance Indicators for UK Economy
https://www.itv.com/news/2019-11-11/uk-economy-avoids-recession-with-0-3-growth-ons-confir
ms/

Real GDP Growth

→ Living Standards ↑
→ Debt ↓
Inflation (2% CPI) → Real Wage Growth
Unemployment (1-3%)
Current Account Balance
Business Investment
Productivity Growth
Social indicators
 Inequality and social mobility
 Education and Health
 Environmental Sustainability
 Economic Growth
Economic growth definitions:
 Actual Economic Growth = an
increase in real GDP (AD) over
time (short run concept)
 Potential Economic Growth = an
increase in productive capacity
(LRAS) over time (long run
concept; trend rate of growth)
 Keynesian v Classical Views on
Growth
Keynesian: Y1 – Y2 = Actual economic
growth (not necessarily inflationary
in the Long Run)
LRAS 1 – LRAS 2 = Potential economic
growth (YFE1 – YFE2)
Classical: Y to Y1 is SR Actual
Economic Growth, but only
temporary because of
inflationary effect of higher AD;
this shifts AS to AS1 and output
returns to Y but now at P2
Classical: LRAS shift from
Y1 to Y2 would represent
Potential (sustainable)
Economic Growth
 Keynesian v Classical Views on
Growth
Y1 – Y2 = Actual economic growth
(not necessarily inflationary in the
Long Run)
LRAS 1 – LRAS 2 = Potential economic
growth
Y to Y1 is SR Actual Economic
Growth, but only temporary
because of inflationary effect
of higher AD; this shifts AS to
AS1 and output returns to Y
but now at P2
LRAS shift from Y1 to Y2
would represent
Potential (sustainable)
growth
Main Benefits of Economic Growth
Higher living standards
Real GNI per capita – helps to lift people out of
extreme poverty and improve development
outcomes (e.g. rising HDI)
Employment effects
Sustained growth stimulates jobs and
contributes to lower unemployment rates which
is turn helps to reduce income inequality.
Fiscal dividend
Higher economic growth will raise tax revenues
and reduce government spending on
unemployment & poverty related welfare
benefits
Accelerator effect
Rising growth stimulates new investment e.g. in
low-carbon technologies. Better growth may
attract foreign direct investment projects
https://www.tutor2u.net/economics/reference/benefi
ts-and-costs-of-economic-growth
Main Costs of Economic Growth
Rapid rates of GDP growth can bring about undesirable
economic and social costs – much depends on the
nature/causes of growth.
Risks of higher inflation and higher interest rates
 Fast-growing demand can lead to demand-pull and
cost-push inflation – this leads to a conflict between
macro objectives
 The central bank may decide to raise interest rates to
control inflation
Environmental effects
 More negative externalities such as pollution & waste
 Risk of unsustainable extraction of finite resources – i.e.
fast growing countries may cause a long-run depletion
of natural resources
Inequalities of income and wealth
 Rapid increases in real national income can lead to a
higher level of inequality and social divisions
 Many of the gains from growth may go to only a few
people
To what extent do you agree
that Economic Growth is always
beneficial? 25 marks
Define Growth concepts (SR and LR)
Diagram to show growth (PPF, AD/AS, Economic Cycle)
Use diagrams to discuss advantages and disadvantages of growth
Include real world examples to support your discussion
Make a judgement: what are the dependent factors that might make economic
growth more or less beneficial?
Possible conclusion: why is stable, sustainable, long run growth so desirable?
 Crash Course Growth and
Productivity
• https://cursa.app/en/course/eco
nomics-by-crashcourse/UHiUYj5
EA0w

https://www.youtube.com/watch?v=eVAS-t83Tx0