Economic Growth
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Economic growth measures how much the income of an economy is growing over time (Gillespie, 2016, p.340). This happens because the increasing amount of income in the economy will provide better standards of living and affordability of purchasing products to people. This essay will explain the types and effects of economic growth, and also discuss how education is the main cause of regional imbalance between north and south of England and how will the government of UK should solve this particular issue.Gross domestic product (GDP) is the best way to measure economics growth (Amadeo, 2018). This includes all goods and services that businesses in the country produce for sale. It doesn’t matter whether they are sold domestically or overseas. GDP also refers to the economic value of goods and services produced within the nation’s boundaries. When GDP is estimated at current prices, it exhibits nominal GDP, whereas real GDP is when the estimation is made at constant prices (Investopedia, n.d.).BASIS FOR COMPARISONNOMINAL GDPREAL GDPMeaningThe aggregate market value of the economic output in a year within the boundaries of the country.The value of economic output produced in a given period, adjusted according to the changes in general price level.What is it?GDP without the effect of inflation.Inflation adjusted GDPExpressed in Current year prices.Base year prices or constant prices.ValueHigher.Generally, Lower.UsesComparison of various quarters of the given year can be made.Comparison of two or more financial year can be done easily.Economic GrowthCannot be analysed easily.Good indicator of economic growth. Source: Surbhi (2015)A business cycle is a cycle of fluctuations in the GDP around its long-term natural growth rate (Corporate Finance Institute, n.d.). [pic 1][pic 2][pic 3][pic 4][pic 5][pic 6][pic 7][pic 8][pic 9][pic 10][pic 11][pic 12][pic 13][pic 14] Source: Business Case Studies (n.d.)
The output gap is the difference between the actual level of national output and the estimated potential level and is usually expressed as a percentage of the level of potential output. Positive output gap is when aggregate demand is greater than aggregate supply. It is associated with countries where an economy is over-heating because of fast and rising demand. When there is a positive output gap, it may cause inflation which is affected by the rise in price of the product, the unemployment rate will be low, while the import will be high. The main problem is likely to be an acceleration of demand-pull and cost-push inflation. Negative output gap is when aggregate demand is lower than aggregate supply. Some factor resources, such as labour and capital machinery are under-utilized, and the difficulty is likely to be higher than average unemployment. An increasing number of people out of work indicate an excess supply of labour, which then causes pressure on real wage rates (Riley, 2012).[pic 15][pic 16][pic 17][pic 18][pic 19][pic 20][pic 21][pic 22][pic 23] [pic 24][pic 25][pic 26][pic 27][pic 28][pic 29][pic 30][pic 31][pic 32][pic 33][pic 34][pic 35][pic 36][pic 37] [pic 38][pic 39][pic 40] Source: Higher Rock Edu (n.d.)Demand and supply side shocks can lead to instability in the economy. For the demand side shocks, it can include a significant rise or fall in the exchange rates in short-term, changes in aggregate demand will be affected, and also a boom in the capital expenditure. While for the supply side shocks affect the costs and prices of the supply, involving the development of technology, natural disasters, and political situations that will impact and influence the supply of the goods or products (Revisionworld, n.d.).The long run aggregate supply curve relates the level of output produced by firms to the price level in the long run (Economics Online, n.d.).[pic 41][pic 42][pic 43][pic 44][pic 45][pic 46][pic 47][pic 48][pic 49][pic 50][pic 51][pic 52][pic 53][pic 54][pic 55][pic 56] [pic 57][pic 58][pic 59][pic 60][pic 61][pic 62] [pic 63][pic 64][pic 65][pic 66] Source: The IB Economist (n.d.)