Study Economics notes on Macro Economy. Useful for revision, homework, and exam preparation in Zimbabwe.
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9/10. The Macro Economy part 1/2 Self Notes a) Economic growth, economic development and Sustainabilityb) National Income statistics c) Classification of countriesd) Employment/unemploymente) The circular flow of income f) Money supply (theory)g) Keynesian and Monetarist schools) h)The demand for money and interest rate determination i) Policies towards developing economies; policies of trade and aid a) Economic growth, economic development and Sustainability Economic growth - Economic growth is an increase in an economy's output - Economic growth rate is the annual \% change in output. - Growth refers to an outward shift of the PPC. - The movement from $X$ to $Y$ might simply be caused by the economy recovering from a previous recession. - A movement from $Y$ to $Z$ would be 'true' economic growth. - Such a shift could be caused by an increase in quantity/quality of factors of production. - In practice, the increase in RGDP from one year to another is taken to be the growth rate. - We must also consider the effect of population growth. - Thus the usual definition of economic growth is: An increase in the real GDP per capita of a nation. - In reality economic growth does not result in a rise in the living standards and quality of life of everyone in an economy. Economic development - "development is theimprovement in the quality of life. It encompasses better education, higher standards of health and nutrition, less poverty, a cleaner environment, more equality of opportunity, greater freedom", Sustainability - Sustainable developmentoccurs when output increases in a way that does not compromise the needs of future generations. - Pursuing sustainable development ensures that economic growth improves living standards and the quality of life not only in the present but also for the future. To achieve this requires effort to balance economic, social and environment objectives. Actual and potential economic growth - Actual economic growth occurs when output increases. - It can be achieved as the result of greater utilisation of existing resources. Page 1 of 23