Difference Between Positive And Negative Economic Growth

1072 Words3 Pages
bulb-icon

Recommended: The impact of inflation and unemployment on economic growth

Economic growth is defined as an increase in the output that an economy produces over a period of time, the minimum being two consecutive quarters. It is an increase in what an economy can produce if it is using all its scarce resources and at its full potential. An increase in an economy’s productive potential can be shown by an outward shift in the economy’s production possibility frontier (PPF).
It is conventionally measured as the percent rate of increase in real gross domestic product (GDP) . GDP is the market value of all the final goods and services produced within in a country in a given time period. Aggregate expenditure: consumer spending (C) plus investment by firms (I) plus government spending (G) plus net exports (X-M) equals …show more content…

GDP does not take into account the sustainability of future GDP.
2. GDP does not take into account the value of non-monetized activity.
3. GDP does not differentiate between more or less productive economic activities. (i.e. implicitly assumes that economic activity is the desirable ends rather than a means to an …show more content…

Positive economic growth is represented by a shift to the right of the AS curve. Equally, negative economic growth decreases the natural level of real GDP, causing the AS curve to shift to the left. The diagram below shows New Zealand GDP growth rate and inflation rate. Typically, higher inflation is caused by economic growth. If AD expands faster than AS, a higher inflation rate will be expected. If AD is rising faster than AS, economic growth is higher than the long run sustainable rate of growth. Global crude oil prices have plunged to a five-year low. The impact on inflation, financial markets, and the economy will be profound. AS curved will shift to AS1. Lower global oil prices will reduce New Zealand inflation directly via petrol prices, and indirectly by reducing costs for many businesses (i.e. couriers and taxis). It now looks likely that inflation will drop and remain below one percent for a whole year. The Reserve Bank is more likely to tighten macro-prudential policy than loosen it over the year ahead. The report upgraded GDP forecast for 2015, to 3.4%. The New Zealand dollar may fall further against the US dollar, but will remain strong against other currencies including the Australian dollar.

Professor Paul Collier has argued, “ Economic growth is not a cure-all; but the absence of growth is a kill-all”. Economic growth can cause a few problems. Economic growth is

Show More
Related

  • Macroeconomics In Unemployment

    1233 Words  | 3 Pages

    Gross domestic product (GDP) is one of the best ways to measure how a country’s economy is doing. A main component in figuring the GDP is personal consumption expenditures. Personal consumption expenditures accounts for about two-thirds of domestic

    Read More

  • Sustainability Essay

    803 Words  | 2 Pages

    The measure of growth is flawed, how countries see their growth is based on the consumption of their people. Many countries use the GDP (Gross Domestic Product) as an indicator for growth, as defined in It’s All Connected, “(GDP) is a calculation of the total monetary value of goods and services produced annually in a country” (Wheeler 11). The...

    Read More

  • The Three Most Important Things I Learned in Economics Class

    965 Words  | 2 Pages

    Economic growth focuses on encouraging firms to invest or encouraging people to save, which in turn creates funds for firms to invest. It runs hand-in-hand with the goal of high employment because in order for firms to be comfortable investing in assets such as plants and equipment, unemployment must be low. Hereby, the people and resources will be available to spur economic growth.

    Read More

  • Why Canada is a Great Place to Live

    388 Words  | 1 Pages

    GDP measures the total value of all goods and services produced within that territory during a specified period. GDP is used to measure a country’s wealth. Basic’s of life, food, etc. shelter and clothing is not likely available to most people in poorer countries. The.

    Read More

  • An Analysis of Gross Domestic Product (GDP)

    1871 Words  | 4 Pages

    GDP is the total aggregate income of the United States. It comprises consumption, investment, government spending, and net exports. GDP in the fourth quarter of 2000 grew at a 1.1% annual rate, the lowest since a 0.8% increase in the second quarter of 1995. The below par performance in GDP is due to those factors that comprise the GDP. The most important of which is consumption.

    Read More

  • The End Of Growth Heinberg Summary

    717 Words  | 2 Pages

    The End of Growth, by Richard Heinberg, goes into deep discussion of the current state of the economy and the its future state when growth ceases. Richard Heinberg discusses current trends within the economy that predict our eventual result. The author makes it very clear that growth is important. As a society, and a planet, we depend on growth. However, certain types of growth, specifically economic growth, are on a path to destruction. He suggests that we find a different definition of growth and focus on that instead of growing from an economic standpoint. Throughout the book, Heinberg uses the image of a balloon to describe our situation. He depicts our society as a balloon that is getting pumped up to be too large and will eventually pop. In other words,

    Read More

  • Comparing Standard of Living and Quality of Life Between Countries Using GDP

    827 Words  | 2 Pages

    Gross Domestic Product (GDP) is the market value of all final goods and services produced by factors of production within a country in a given period of time. It can be calculated using either the income, output, or expenditure method as illustrated on the circular flow of income diagram below.

    Read More

  • Why Are Some Countries Richer Than Others?

    1486 Words  | 3 Pages

    Every year there is a ‘league table‘ published showing the level of economic growth achieved by each country. The comparison is made using each countries Gross Domestic Product, or GDP. An important factor to look at is the difference between actual and potential economic growth. Actual economic growth increases in real GDP. This increase can occur as result of using previously unemployed resources, or reallocating resources into more productive areas or improving existing resources. Whereas potential economic growth is the productive capacity of the economy. For example, it can be shown by the predicted ability of the country to produce goods and services. This changes when there is an increase in the quantity or quality of the resources. All countries have different ways of achieving this with the resources they have available to them. For this reason it party answers the question of why some countries are richer than others. It is widely thought that the productive capacity of an economy will increase each year largely due to improvements in education and technology. This will obviously differ from country to country. For example, in the UK the quality of fertilizer could be improved, hence forth increase the years fruit and vegetable output.

    Read More

  • Article Review of When Growth Stalls

    769 Words  | 2 Pages

    Review of: Olson, Matthew S., Van Bever, Derek ,Verry, Seth. 2008. When Growth Stalls. Harvard Business Review, 51-62.

    Read More

  • Factors That Contribute To Economic Growth

    1280 Words  | 3 Pages

    In order for any country to survive in comparison to another developed country they must be able to grow and sustain a healthy and flourishing economy. This paper is designed to give a detailed insight of economic growth and the sectors that influence economic growth. Economic growth in a country is essential to the reduction of poverty, without such reduction; poverty would continue to increase therefore economic growth is inevitable. Through economic growth, it is also an aid in the reduction of the unemployment rate and it also helps to reduce the budget deficit of the government. Economic growth can also encourage better living standards for all it is citizens because with economic growth there are improvements in the public sectors, educational and healthcare facilities. Through economic growth social spending can also be increased without an increase of taxes.

    Read More

  • Economic Growth Essay

    700 Words  | 2 Pages

    Economic growth is one of the most important fields in economics. In current generation economic is developing well. Economic growth is really important to country and for the world as well. Economic are one of the identity for country because it shows a country development and attraction for other countries (F, Peter. 2014). For example well economic develop such as Singapore, Dubai, New York, and Japan. These countries are well develop and maintaining their economic growths. Economic growths are really important because higher average incomes enables consumers to enjoy more goods and services. Then, lower unemployment with higher output and positive economic growth firms tend to utilize more workers creating more employment. Enhanced public

    Read More

  • The role of culture in the economic development of countries

    3230 Words  | 7 Pages

    Economic development is fundamentally about enhancing the factors of productive capacity, such as land, labor, capital, and technology, of a national, state, or local economy, as stated by the U.S. Economic Development Administration. Economic development influences growth and restructuring of an economy to enhance economic well-being. We experience economic growth when our standard of living is rising. Rather than being a simplistic process, economic development typically is a range of influences aimed at achieving objectives like creating jobs and wealth and improving the quality of life. It incorporates coordinated initiatives targeted at expanding infrastructure and increasing the volume and/or quality of goods and services produced by a community. A common measure of economic development is a country’s gross national ...

    Read More

  • Effects Of Inflation Essay

    1615 Words  | 4 Pages

    The Gross Domestic Product (GDP) is the total market value of in a country’s output. The GDP is the total market value of all final goods and services produced by factors in within given period of time that located in the country doesn’t matter they are citizens or foreign-owned companies. Hence, the GDP is the best way to measure the country economy.

    Read More

  • Nigeria Economic Development

    1076 Words  | 3 Pages

    But the growth has not been inclusive, broad-based and transformational. The implication of this trend is that economic growth in Nigeria has not resulted in the desired structural changes that would make manufacturing the engine of growth, create employment, promote technological development and induce poverty alleviation. Available data puts the national poverty level at 54.4 per cent. Similarly, there has been rising unemployment, with the current level put at 19.7 per cent by the National Bureau of Statistics (NBS).

    Read More

  • Modern Economic Growth

    1170 Words  | 3 Pages

    Theoretical model of modern economic growth shows that long-term economic growth and raise the level of per capita income depends on technological progress. This is because of without technological progress and with the increase of capital per capita, marginal returns of capital would diminish and output per capita growth would eventually stagnate (Solow, 1956; Swan, 1956). Studies have shown that “experience, skills and knowledge in the long-term economic growth is playing an increasingly important role” (World Bank, 1999). Despite how technological progress work on economic growth, and how there are different views on the role of in the end, but I am afraid no one would deny that technical progress in the important role of economic development. In this sense, for a country to achieve long-term economic growth, we must continue to promote technological progress. However, economic growth theory is analyzed in general, and usually under the assumption that in the closed economy, and technological progress in a country not normally have taken place in various departments at the same time, and now the economy are often increasingly open economy. In this way, the technological progress in different economic impact on a country may be quite different. In addition, we assume that technological progress is Hicks neutral, is to an industry in itself, but technological progress also reflects the establishment of new industries and development. The new industries and technology-intensive industries generally older than the high, the use of less labor. Even the old industries, the general trend of technological progress is labor-saving.

    Read More

More about Difference Between Positive And Negative Economic Growth

Open Document