This document discusses economic growth. It defines economic growth as increases in national output over time, often measured by GDP. Potential economic growth is the growth in an economy's productive potential, while actual economic growth is the extent to which an economy grows to its potential. The document outlines objectives to revise economic growth, understand how to generate it, explain its causes, and examine advantages and disadvantages. It then discusses generating growth through stimulating aggregate demand, and explains causes of growth like technological progress. Finally, it outlines advantages like improved living standards and tax revenue, and disadvantages like inequality and environmental damage.

1. 1.1 The Economic
Cycle and Economic
Growth

2. Unit 4 part 1
• The economic cycle and economic
growth
• Use of national income data to assess
living standards
• Inflation and deflation
• Unemployment

3. Objectives
• Quick revision of Economic
growth
• Understand how to
generate economic growth
• Be able to explain the
causes of economic growth
• Examine the advantages and
disadvantages of economic
growth

4. What are?
• Economic growth
Increases in national output over
time, often measured by changes in GDP
• Potential economic growth
Growth in the productive potential of an
economy
• Actual economic growth
The extent to which economies grow to
their potential

5. Objectives
• Quick revision of Economic
growth
• Understand how to
generate economic growth
• Be able to explain the
causes of economic growth
• Examine the advantages and
disadvantages of economic
growth

6. How can you generate economic
growth?

7. Over to you 1
• Using an AS/AD diagram, illustrate the
following:
1. An economy experiencing potential
growth, but not actual growth.
2. A government attempting to generate
rapid short-term economic growth by
stimulating AD
3. An economy experiencing non-
inflationary, actual economic growth.

8. An economy experiencing potential
growth, but not actual growth.
The potential is LRAS2, but economy has
not actually moved there yet. How could
this happen?

9. A government attempting to
generate rapid short-term economic
growth by stimulating AD
What happens as the economy moves onto
the vertical LRAS?

10. An economy experiencing non-
inflationary, actual economic
growth.
Move from AD1 to AD2 and then to AD3?
Or not?

11. Objectives
• Quick revision of Economic
growth
• Understand how to
generate economic growth
• Be able to explain the
causes of economic growth
• Examine the advantages and
disadvantages of economic
growth

12. Be able to explain the causes of
economic growth

13. The fourth industrial revolution?

14. Objectives
• Quick revision of Economic
growth
• Understand how to
generate economic growth
• Be able to explain the
causes of economic growth
• Examine the advantages and
disadvantages of economic
growth

15. Advantages of Economic Growth
• Rise in material standard of living of
households = more people can enjoy more
goods and services
• Difference between developing and
developed world?
• Reduce or eliminate absolute poverty
• More tax revenue for same tax rates means
more finance for important public and merit
goods and to reduce negative effects on the
environment
• Greater political power. Shift from USA to
China?

16. Disadvantages of Economic Growth
• “Jam today vs Jam tomorrow” =>
economy at full employment will have
to stop producing consumer goods to
invest in capital goods
• Negative externalities => pollution
• Increased inequalities as gap between
rich and poor increases
• Threat to traditional ways of life => does
greater prosperity = greater happiness?
Maslow…

17. Objectives
• Quick revision of Economic
growth
• Understand how to
generate economic growth
• Be able to explain the
causes of economic growth
• Examine the advantages and
disadvantages of economic
growth