Investment influences the rate of economic growth because it is a component of aggregate demand (AD) and more importantly influences the productive capacity of the economy. (LRAS) An increase in investment should be a boost to economic growth. Readers Question: Discuss the importance of investment in increasing economic growth. Investment means expenditure on capital spending, …
Does economic growth conflict with the objective of the balance of payments stability? UK economic growth and current account balance Both economic growth and balance of payments are macroeconomic objectives. Economic growth is an increase in real GDP – leading to higher living standards. Balance of payments stability refers to a sustainable or limited current …
How does the minimum wage affect aggregate demand/aggregate supply and macroeconomic factors such as inflation, unemployment and economic growth? A minimum wage is the statutory minimum wage that employers can pay per hour. In 2019, the UK minimum wage was set at £8.21 an hour for workers over 25. In the US, the federal min …
Economic growth is an increase in national output/income (higher real GDP). There are two main aspects of economic growth: Aggregate demand (AD) (consumer spending, investment levels, government spending, exports-imports) Aggregate supply (AS) (Productive capacity, the efficiency of economy, labour productivity) To increase economic growth We need to see a rise in demand and/or an increase …
Economic growth means an increase in real GDP – this leads to higher output and higher average incomes. Governments often try to increase the growth rate because it will have various advantages. These include Benefits of economic growth Increased consumption. Firstly, higher GDP implies the economy is producing more goods and services and therefore consumers …
Readers Question: Given the widely varying fiscal policies of countries, both left and right, how come their growth rates over the long term are so close? source: World Bank To some extent growth rates are close; though it also depends which data and countries you use. However, from a very broad perspective, growth rates do …
The long-run trend rate of growth is the average sustainable rate of economic growth over a period of time. It could also be termed as the ‘underlying trend rate of economic growth’ The long-run trend rate is determined by growth in productive capacity (AS). It is the rate of growth which is consistent with low …
Readers Question: Does the Rahn Curve support the empirical evidence? If not, why not? Can you prove that there is a relationship between the level of Government Spending and GDP growth? The Rahn Curve suggests that there is an optimal level of government spending which maximises the rate of economic growth. Initially, higher government spending …