Economic Growth Lecture 2018 (recorded lecture 1a)

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Economic Growth:

Economic Growth Lecture 1

Slide2:

How to determine an economy’s actual national output level? AD/AS model & Circular flow of income How do you change an economy’s actual national output level? AD/AS model: Change in AD and/or AS Circular flow of income: Change in J or W What have you learnt ?

Slide3:

Defin e and explain actual and potential economic growth using AD/ AS Factors affecting actual and potential economic growth What shall we learn today?

Singapore’s Real GDP:

Year 2013 2014 2015 2016 Gross Domestic Product At 2010 Market Prices (million dollars) 373,471.5 386,812.9 394,288.6 402,159.8 Singapore’s Real GDP Recap: What is this measuring? What can you tell about the trend in real GDP ?

Sustained Economic Growth:

Sustained Economic Growth Refers to a situation where an economy’s real national output increases over an extended period of time without accelerating inflation rate i.e. increase in real national output that does NOT cause price levels to accelerate from its current levels (non-inflationary growth) Pg 8 5

How does a country achieve sustained economic growth?:

How does a country achieve s ustained e conomic g rowth ? Using AD-AS model: 1) An increase in potential national output -  a rise in vertical segment of the a ggregate supply (AS) and this must be realised with 2) an increase in aggregate demand (AD)

Actual Economic Growth:

Actual Economic Growth Actual economic growth is the annual percentage increase in actual national output, i.e. the rate of growth in actual output (rate of real GDP growth). Pg 8 5

Formula to calculate Actual Economic Growth:

Formula to calculate Actual Economic Growth GDP growth rate = GDP t – GDP t-1 --------------------- X 100% GDP t-1 Real GDP is typically used in this calculation.

Actual Economic Growth:

Actual Economic Growth S’pore GDP Growth Rate ( 200 9 - 201 7 )

Actual Economic Growth:

Actual Economic Growth

Think!:

Think! Why might economic growth rates be important to firms and the government? Economic growth rates help to inform the govt about the macroeconomic policy that it ought to adopt. GDP growth rate estimates indicate business prospects. If GDP growth has been rising  private firms will invest in anticipation of higher DD for their output . If private firms are planning overseas investment , useful for them to consider the economic performance of the countries which they are planning to venture into.

Potential Economic Growth:

Potential Economic Growth Speed at which the economy can grow. % increase in the capacity of the economy to produce

Analogy of actual and potential economic growth:

Analogy of actual and p otential e conomic g rowth E D Econs MYE Results Econs Promo Results

Analogy of actual and potential economic growth:

Analogy of actual and p otential e conomic g rowth Econs A-level Results Econs A-level Results C

Slide15:

Potential EG Actual EG Analogy of actual and potential economic growth

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