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1、GrowthoftheEconomyAndCyclicalInstability Content EconomicorbusinesscycleTheNatureandCausesofFluctuationsineconomicactivityThetrendratesofeconomicgrowthThecostsandbenefitsofeconomicgrowthTheuseandlimitationsofnationalincomeasanindicatorofchangesinlivingstandards EconomicCycle Thisshowstherateofeconom
2、icgrowthcomparedtolongtermtrendratesTheeconomiccycleshowsdifferencesovertimebetweenrapideconomicgrowth boom recovery andalternativeperiodswheretheeconomyisnotgrowingorisdeclininginsize recessionorcontraction ThemeasureusedtoassessthegrowthoftheeconomyisthecomparisonofgrossdomesticproductorGDPovertim
3、e GDP definition GDP GROSSDOMESTICPRODUCTTheMarketvalueofallgoodsandservicesproducedwithinthecountry whatweproducewithintheUK output WhatistheBusinessCycle AlsoknownasthetradecycleMosteconomiesovertimewillseeantrendofupwardprogressionDoesnotgrowsmoothly fluctuategoingthroughupsanddownsknowastheBUSIN
4、ESSCYCLE Time Output StagesoftheBusinessCycle Boom peak FasteconomicgrowthConsumerspendingandinvestmenthighBusinesswillhavehighdemandforgoods servicesIncreasingincomes increasingcompetitionforworkers Profitshigh highdemandforresources pricesrisecanleadtoinflation Wagesrising Highoutputduetohighdeman
5、dSteadyeconomicgrowthBusinessandconsumerconfidencehigh StagesoftheBusinessCycle Recession downturn economicslowdown IncomesstarttofallOutputstartstofallPossiblefallindemandforproductsDeclineinprofitLayoffworkers unemploymentConsumer save andbusinessconfidenceislowReducedinvestment StagesoftheBusines
6、sCycle Slump depression HighunemploymentConsumerconfidencelowInvestmentlowProfitslowClosuresAnygrowthwillbeslow StagesoftheBusinessCycle Recovery expansion upswing IncomestartsriseOutputincreasesSpendingandconsumerconfidenceincreasesMoreemploymentasaresult CausesofEconomicGrowth Booms dipsineconomic
7、growthcanoccurduetoanumberofreasons Increaseinaggregatedemandcausedby Anincreaseinconsumption thismaybecausedby ariseinincomelevels andecreaseininterestrates housepriceinflationAriseinthelevelofgovernmentspendingAbalanceofpaymentssurplus CauseofEconomicGrowth 2 Labourshortages ifthereareshortagesofw
8、orkersinspecificareasitmeansthattheeconomywillnotbeabletoutiliseitsresourcesefficientlyandthereforeeconomicgrowthwillslow3 Increaseindemandforimports thiswillworsenthebalanceofpaymentsdeficit DemandandSupplysideshocks SupplysideanddemandsideshockscanleadtoinstabilityintheeconomyShocksareunexpectedev
9、entsthatinfluencethedemand supplyinaneconomyAstheUKoperatesinaglobalmarkettheireconomyisopentoshocksfromacrosstheworld DemandSideShocks Thesecaninclude AsignificantriseorfallinexchangeratesinshorttermChangesintherateofeconomicgrowthforcountriesthatyoutradealotwithChangesinaggregatedemandAboomincapit
10、alexpendituree g inconstructionorICT SupplySideShocks TheseaffectthecostsandpricesofsupplyThesecaninclude TechnologyNaturaldisasterswhichimpactthesupplyofparticulargoodse g cropsPoliticalsituationsthatinfluencethesupplyofparticularproductse g oil Trendrateofeconomicgrowth Thetrendrateofeconomicgrowt
11、hshowstherateofeconomicgrowthistheaveragerateofeconomicgrowthoveraperiodoftimeThetrendrateofeconomicgrowthisinfluencedbyanumberoffactorsofsupplysideincluding InvestmentEducationTrainingTechnologicalchange Influencesonthetrendrateofeconomicgrowth Investment Investmentinfluencesthetrendrateofeconomicg
12、rowthashigherlevelsofinvestmentincreaseADandexpenditurewithintheeconomyInadditioninvestmentexpendituremeanstherearemorecapitalgoodsforworkerstousetoproduceconsumergoodsthereforeincreasingthelevelofoutputintheeconomy Influencesonthetrendrateofeconomicgrowth EducationandTraining Educationandtrainingca
13、nincreasethegrowthrateofthelabourforceintheeconomyThesecanbothincreasethetrendrateofgrowthinlabourproductivityintheUKthereforedrivingthelevelofeconomicgrowth Influencesonthetrendrateofeconomicgrowth technology ChangesintechnologycanreducethecostsofgoodsintheeconomyIfthecostsofsupplyingproductsdecrea
14、sesthenproductionpossibilityfrontierwillshiftoutwards TheCostsandBenefitsofEconomicGrowth TherearecostsandbenefitsthatareassociatedwitheconomicgrowthSomecostsarearesultofexternalitieswhichoccurduetoeconomicgrowthEconomistsfocusontheideaofeconomicgrowthasbeingsustainablewhichmeansitcancontinueoverthe
15、longterm TheCostsofEconomicGrowth Economicgrowthcausescostsfortheeconomy Inflationrisks eitherdemand pullorcost pushTheenvironment asoutputincreasesnegativeexternalitiescanincreasee g pollutionRegionaldisparitiesordifferences CanleadtogreaterdifferencesbetweenrichandpoorInequalitiesofincomeandwealth
16、 thesecan BenefitsofEconomicGrowth EconomicgrowthhasanacceleratoreffectoncapitalinvestmentIncreasestaxationforthegovernmentEnvironmentalbenefits iftheeconomyisgrowingthereismoremoneytoinvestincleanertechnologiestherebyreducingpollution TheBenefitsofEconomicGrowth Economicgrowthhasanumberofbenefits Improvementtolivingstandardsandlowerratesofpoverty especiallyindevelopingcountriesFallinglevelsofunemployment Economicgrowthstimulateslevelsofemployment SustainabilityofEconomicGrowth Theaimformostecon
