ECONOMICS
ECONOMIC GROWTH
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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More goods produced in the economy
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An increase in the value of goods produced in an economy
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an increase in resources available to use in the economy
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more goods exported overseas than imported into the country
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Detailed explanation-1: -Economic Growth is an increase in the ABILITY to produce goods and services. This means we are ABLE to produce more, but it doesn’t necessarily mean we do produce more. More on this later. If we only had more resources we could produce more goods and services and satisfy more of our wants.
Detailed explanation-2: -Economic growth – measured as an increase of people’s real income – means that the ratio between people’s income and the prices of what they can buy is increasing: goods and services become more affordable, people become less poor.
Detailed explanation-3: -Capital goods are important for increasing the long-term productive capacity of the economy. More capital goods reduce consumption in the short-term, but can lead to higher living standards in the economy. Therefore, economies often face a trade-off between consumer goods and capital goods.
Detailed explanation-4: -So the citizens of a country with high GDP are likely to have high incomes and high standards of living and if GDP goes up a lot, people are likely to be earning and spending more and businesses are likely to be hiring and investing more. In other words people are likely to be feeling better off.
Detailed explanation-5: -In broad terms, an increase in real GDP is interpreted as a sign that the economy is doing well. When real GDP is growing strongly, employment is likely to be increasing as companies hire more workers for their factories and people have more money in their pockets.