Risks of higher inflation and higher interest rates. Economic Growth. D 3. For example, in the UK in the period 1992-2007, low inflation helped economic growth to be more stable – than the previous boom and bust cycles. of the workforce has a long history in economics, and the history helps to explain a number of the issues that are pertinent to today’s analysis of economic growth. Boom and bust economic cycles. While accounting profit considers only explicit costs, economic profit considers both explicit and implicit costs. A firm had sales revenue of $1 million last year. Analysts watch economic growth to discover what stage of the business cycle the economy is in. 120. Key: 1. Sir William Petty (1676 [1899]) assessed the economics of war and of immigration in terms of skills (and wages) of individuals. 23 But as muchas benefits we receive from this growth there arethe costs and circumstances which cannot beignored.21 22. However, if economic growth is at a sustainable rate, this will not occur. Determinants of economic growth are inter-related factors that directly influence the rate of economic growth i.e. 67. The economy would experience the most future economic growth if it chooses to maximize the production of a) Consumption goods b) Capital goods c) Services d) None of the above; corn. C 10. In this case, we get economic growth without inflation. Main Costs of Economic Growth. 4 computers. Four of these are typically grouped under supply factors which include natural resources, human resources, capital goods and technology. It spent $600,000 on labor, $150,000 on capital and $200,000 on materials. b. a rapid decline in population growth rates. It is also capable of spawning new economic growth. It measures all the aspects which include people in a country become wealthier, healthier, better educated, and have greater access to good quality housing. Self-Check Questions. Economic Development is the process focusing on both qualitative and quantitative growth of the economy. False 5. 22 23. C 2. There are six major determinants of growth. The Phases of Economic Growth . By keeping inflation low, it enables a long period of sustainable economic growth. Holland. If growth is too far beyond a healthy growth rate, it overheats. Opportunity Cost 7. increase in real GDP of an economy. The best phase is expansion. Economic growth: If an economy can raise the rate of growth of productivity then the trend growth of national output can pick up. That creates an asset bubble. d. application of science to problems of economic production. 66. According to Kuznets, the identifying characteristic of "modern economic growth" is a. expansion of heavy industry. False 8. a) 1/ b) 1 apple 9. Current account deficit 3. 3. c.* high rates of saving and investment. The bill cost $1.5 trillion and is designed to increase economic growth for the next ten years. In this diagram we have AD increasing at the same rate as LRAS. Loss of land:Increased economic growth results in loss ofavailable land20 21. High inflationary growth is unsustainable and is usually followed by a recession. Simply put, the opportunity cost is what you must forgo in order to get something. C 6. The benefit or value that was given up can refer to decisions in your personal life, in a company, in the economy, in the environment, or on a governmental level. For example, between 1993 and 2007, both economic growth and inflation were at a sustainable rate. Rapid rates of GDP growth can bring about undesirable economic and social costs – much depends on the nature/causes of growth. This is when the economy is growing in a sustainable fashion. Economic growth is important for every countryto cope with the developing world. Opportunity cost is the value of something when a particular course of action is chosen. A 4. 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