Economic Growth

Try Getting started P139

Name 3 countries you think have high/ low

EG rates

http://en.wikipedia.org/wiki/List_of_countries

_by_real_GDP_growth_rate_(latest_year)

What is Economic Growth (EG)?

National income = total value of all incomes in the economy added together

National output = total value of all output or production in the economy added together

National expenditure = total value of all spending in the economy added together

National income = National output = National expenditure

As these grow = Economic Growth which is one of every government’s Macroeconomic Objectives (Can you think of others?)

How do we measure EG?

GDP (Gross Domestic Product) =total value of all goods and services produced in an economy (domestically). It is the most used measure of national income

http://www.youtube.com/watch?v=yUiU_xRPwMc GDP 3:51

How do we measure Economic Growth?

We can find out the rate of growth by working out

the % change in the total growth

So if 2010 total GDP = $2.3 billion

2011 total GDP = $2.4 billion

What is the rate of growth?

0.1 / 2.3 * 100 = 4.3%

(remember it’s the change divided by the old figure)

Total growth/ Rate of growth

Brainstorm Jigsaw; In your group take 1 of the

limitations read it & explain it to the class Notes1. Inflation; in prices means GDP when

the amount of G&S are the same. That is, money (nominal) GDP where as real GDP (actual output) hasn’t. We must then adjust money GDP to reflect inflation, i.e. Money GDP – inflation rate = real GDP

Limitations of GDP as a growth measure

2. Population changes; GDP per capita (per person) = GDP / population

3. Statistical errors4. Home produced goods are not counted, e.g.

painting house, growing own vegetables 5. The hidden (informal) economy; getting paid

in cash6. GDP doesn’t necessarily mean living

standards, for e.g. pollution, income inequality, leisure time

7. Environmental damage8. Try Q1 P141

Limitations of GDP as a growth measure

Draw 2 axis; y=GDP, x = Time In pencil sketch in how you think the graph

would look Copy Fig. 31.5 P142 and annotate it from

the content on P142 Where do you think Thailand/ The World/

China… are at on the cycle now?

The economic cycle

Economic Growth

Benefits Problems

From P143 complete the table

• Do Q2

• Do exam practice

• Update glossary

•TASK: Each student must choose 1 country. During the Macroeconomics

section of the course you are to find out data relating to that country &

present it to the class.

1. Find out about your country’s GDP; nominal, per capita, and rate of

change