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Define Gross Domestic Product (GDP)
Money value of all final goods and service produced in New Zealand in one year (value, produced where, time period)
Explain why real GDP is a better measure of a country's economic well-being than nominal GDP
Real GDP takes into account changes in the price level (inflation), therefore it measures changes in real output (output comment critical to show well-being)
Define net social welfare
A measure of growth that includes both economic and non-economic factors
Describe the difference between resources and incomes
Resources are used to produce goods while incomes are the payment for resources
Describe what is meant by productive capacity
The ability/potential/maximum attainable that a firm or economy can produce. (answer must indicate potential not actual)
Identify one strength and weakness of changes in real income as a measure of economic growth
- Strength: Shows if the whole country is earning more income: if more goods and services have been produced.
- Weakness: Does not show - how income is distributed; the composition of output; impact on environment
Identify one strength and one weakness of productive capacity as a measure of economic growth
- Strength: Shows if the country is able to increase the production of goods and services.
- Weakness: Does not indicate if more goods and services have been produced; if standard of living has imporoved; DIY activities not included
Identify one strength and one weakness of net social welfare as a measure of economic growth
- Strength: Includes non-economic welfare to indicate the country's overall well-being; takes into account environment impact.
- Weakness: The difficulty in measuring some factors that contribute to 'happiness' or well-being may distort the overall measure, or may show an increase, even though fewer goods and services are being produced.
Explain how migration or trade might influence a country's rate of economic growth.
A net migration gain will stimulate the economy because migrants need housing, more homes are built/will contribute to increased growth
By referring to the circular flow model. Explain how an increase in government spending could lead to economic growth.
An increase in government spending would increase incomes, e.g., transfer payments, which would increase payments for goods and services, leading to more production OR an increase in government spending, e.g., a subsidy, would increase in government spending, e.g., a subsidy would increase production
Explain why, in the Smple Circular Flow Model, economic activity can be measured either by the flow of payments for goods and services or by the flow of incomes
Both methods give the same answer OR all income is spent on goods and services
Describe the difference between savings and investment
Savings is foregone comsumption, investment is capital creation
Explain how investment in human capital, such as education, might lead to economic growth
Increased education means workers become more productive or innovative so production increases
Describe how increased investment and economic growth are linked
Increased investment means more capital goods which will increase productivity (or production) which results in economic growth
Explain how future growth comes at the cost of present consumption
Idea that if more resources are used to satisfy present consumption, it will limit future growth, while if more resources are put into the production of capital goods now, or investment, future growth will be much greater
Explain how economic growth can have both positive and negative effects on the environment
- Positive: Increased tax payments may allow local/central government to spend more on environmental protection, or increased profits may allow firms to invest in developing more environmentally friendly products or processes
- Negative: As production increases resources are depleted/more pollution is created
Identify several ways in which economic growth benefits households
Increased goods and services, increased employment, increased (real) incomes, increased savings
Explain how economic growth can have positive and negative effects on the distribution of income
- Positive effect: e.g., more production will create more jobs, reducing unemployment and increasing incomes of those workers previously unemployed.
- Negative effects: e.g., growth and increased incomes may be restricted to send some industries or regions creating further inequality
Describe what is meant by 'a positive outcome of growth'
- A benefit/gain/advantage to the country as a result of increased production.
- The good things that come from growth, e.g., decrease in unemployment
Use an example to explain how economic growth might have an unequal regional impact
Resources are unevenly distributed throughout the country, so economic growth will also be uneven. Example: an increase in growth as a result of increased farm production would benefit areas where there is a lot of farming, but have less impact on other regions; oil in Taranaki; venues for the Lions Tour matches
Identify three positive effects of economic growth
Increased employment, increased production of goods and services, increased incomes, increased savings, increased investment, increased tax revenue for the government, increased standard of living, increased business confidence, decreased government spending on welfare
Identify three negative effects of economic growth
Resource depetion, environmental damage/pollution, unwelcome social change, inflation, uneven impact of increased incomes and higher employment, increased inequality of income
Describe the difference between a capital good and a consumer good
- Consumer goods are used to satisfy needs and wants.
- Capital goods are man-made goods used t omake other goods/used by producers
Describe the difference between incomes and resources
Incomes are payments for resources while resources are the factors of production used to produce goods and services
What is meant by the trade cycle?
The recurring fluctuations in economic activity that an economy experiences over a number of years from boom to depression to recovery again