Economic growth is the percentage increase in real national output in a given time period or the increase in the productive potential of the economy. Countries grwo at different rates, this is partly due to the fact that they are at different stages of their economic cycle. The economic growth for the UK is at 0.2%.
The main measure of output is gross domestic product (GDP). GDP is the total value of goods and services produced in an economy during one year. Economic growth can be be measured in nominal terms which include inflation, or real terms which are adjusted for inflation.
Aggregate supply is the total supply of goods and services that are produced in an economy at a given price level
DRAW GRAPGH (AS DIAGRAM)
Aggregate demand is the total output of goods and services produced in the economy ocer a period of time
AD = C+I+G+(X-M)
C referes to consumer spending on goods and services, it includes durable and non durable goods. I refers to investment spending, demand for goods and services by the firm. G refers to government spending on publicyly provided goods and services including public and merit goods. Transfer payments are not included. X refers to exports of goods and services which is spending from abroad on an economy’s goods and services. Exports are inflow of demand in the circular flow of income in the economy. I refers to imports of goods and services which is the withdrawal from the circular flow of income in an economy. Imports are spending on foreign goods and services.
DRAW GRAPH (CIRCULAR FLOW OF INCOME)
--- Savings, taxes and imports are leakages or withdrawals from an economy while Investment, government spending and exports are injections in the economy.
DRAW DIAGRAM (BUSINESS CYCLE)
The business or economic cycle shows the pattern of economic growth that occur in economics over time. They are four main stages of the business cycle: boom, recession, slump and recovery. Boom is a period of...
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