gcse economics - the big picture: economic growth

This is measured by the yearly change in Gross Domestic Product (GDP). It is usually expressed as a % change.

Example Year 1 Tinseltown produces £1,000 worth of goods
Year 2 Tinseltown produces £1,100 worth of goods

Economic growth would be 10%

It (GDP) can be measured in 3 ways. Each is identical

• The total production (output) of all businesses
• The total incomes and profits in the country
• The total of all spending by individuals and businesses

WHAT CAUSES ECONOMIC GROWTH?

Anything which allows the country to produce more goods and services.

• More business investment * Better productivity
• Better machinery * Improved training
• Better skills * New technology
• New ideas * Increased efficiency

COSTS AND BENEFITS OF ECONOMIC GROWTH

BENEFITS: More income for society, Should create jobs, Could reduce the number of poor people, More goods produced and probably more choice for customers and businesses, Higher standard of living, Feelgood factor in society

COSTS: Extra production could cause extra pollution, Exhaustion of non renewable resources like oil, Only the rich may gain the benefits The poor stay poor and inequality increases, Greater stress on workers to produce more goods

ACTION

A For each cause of economic growth. Try to think why it would allow businesses and the economy to produce a greater number of goods and services.
B For each cost and benefit. Try to think through why it is in reality a cost or benefit
C Are you in favour of economic growth? Explain your answer.

 SMART THINKING

d What is human capital? How can an economy improve its stock of human capital? Why is it important?