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AS Economics

AS Economics. Aims and Objectives. Aim: Understand short and long term economic growth Objectives: Distinguish between SR and LR growth Determine factors responsible for growth Analyse policies for managing growth. Starter.

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AS Economics

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  1. AS Economics

  2. Aims and Objectives Aim: • Understand short and long term economic growth Objectives: • Distinguish between SR and LR growth • Determine factors responsible for growth • Analyse policies for managing growth

  3. Starter • Draw the diagram to show the distinction between actual economic growth and potential economic growth.

  4. Short Term Economic Growth • 0A actual growth below trend, high unemployment, low output • Negative output gap • Can be shown on PPF diagram GDP Trend Growth Actual Growth 0 Time A B

  5. Short Term Economic Growth • Point A = negative output gap – not reaching it’s productive potential • A movement from A to the PPF would indicate economic recovery showing that all factors or production are employed • Can show on AD/AS curves Capital Goods PPF A Consumer Goods

  6. Short Term Economic Growth PRICE LEVEL LRAS • AD shifts from AD to AD1 below FE. • Any factors which restore AD from AD1 to AD will shift A to PPF and restore economy to its trend or potential growth rate. • Increase in C, I, G, (X-M) will create short term growth • May not want to increase AD too much - inflationary AD2 AD AD1 FE REAL GDP

  7. Long Term Economic Growth PRICE LEVEL • Mainly caused by supply side factors • In LR AS is affected by: • An increase in the qty of F of P • An increase in the productivity of factors of production • Advances in technology and their take-up by firms • Decide in groups how the government can stimulate each of these factors LRAS2 LRAS1 AD REAL GDP

  8. Increase Productivity of F of P • Invest in education • Compulsory post 16 education? • Increase numbers leaving with 5 GCSEs including English / Maths • Provide apprenticeships • Encourage university • http://www.bbc.co.uk/news/education-16803396

  9. Migration Economist Articles

  10. Increase Qty F of P • Create stable environment for investment • Keep corporation tax competitive internationally • Allow immigration • Work schemes • Expand tertiary sector allowing more women into work

  11. Advances in Technology • Article

  12. Advances in Technology • Reduce firm’s costs, become more productive and efficient • Leads to new products that generate new spending and jobs. • Investment in technology must be well targeted to stimulate growth ie. Sectors which are expanding.

  13. Plenary • Construct two diagrams that you could use in essays to show the effect of growth on an economy. • Explain what the diagrams show.

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