Download The AD/AS model - Gore High School

A.S 2.3
Growth Revision
4 credits
Name________________
Define the words
• Economic growth _________________________________
________________________________________________
• Gross Domestic Product ____________________________
________________________________________________
• Nominal GDP ____________________________________
_______________________________________________
• Real GDP________________________________________
• Productive Capacity _______________________________
________________________________________________
• Net Social Welfare _________________________________
________________________________________________
Define the words
• Economic growth – An increase in the amount of goods and
services produced in an economy
• Gross Domestic Product – The value of all goods and services
produced in an economy in a year
• Nominal GDP The value of all goods and services produced in an
economy in a year – Measured in current-year dollars
• Real GDP nominal GDP adjusted for inflation
• Productive Capacity the potential of a Nations resources,
• Net Social Welfare Economic welfare + non-economic welfare
•
1.
2.
3.
Measures of Economic Growth
Name the three different ways economic growth can be measured
_____________________
_____________________
_____________________
4. Why might net social welfare be a better measure of economic growth
than real GDP
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
5. Explain why real GDP may be a better measure than nominal GDP
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
•
1.
2.
3.
Measures of Economic Growth
Name the three different ways economic growth can be measured
Real GDP
Productive Capacity
Net Social Welfare
4. Why might net social welfare be a better measure of economic growth than
real GDP
Net social welfare includes the value of goods and services being produced as
well as non economic factors such as, levels of pollution, education and life
expectancy. Real GDP only shows whether more is being produced but does
not give us an indication of whether people’s standard of living has
deteriorated.
5. Explain why real GDP may be a better measure than nominal GDP
Real GDP takes out the effects of inflation so gives a real measure for whether
more goods and services have been produced. Nominal GDP may show
increases if prices have risen. Therefore Real GDP is a better measure of
economic growth.
Define these words
• Consumer Goods ________________________________
______________________________________________
• Capital Goods __________________________________
______________________________________________
• Human Capital _________________________________
______________________________________________
• Savings ______________________________________
• Investment _____________________________________
Define these words
• Consumer Goods – Goods and services which are
used by consumers
• Capital Goods Human made goods used to produce
other goods and services
• Human Capital The skills, knowledge and abilities of
employees
• Savings Income not spent
• Investment Purchasing capital equipment
Production Possibilities Curve
• Name the two assumptions made when drawing the PPF
1. _________________________
2. _________________________
When either of these factors change, the PPF will shift
Show the effect of the changes in the following PPF models
Peas
Peas
Carrots
New technology
applying to both
peas and carrots
Capital
Goods
Capital
Goods
Carrots
New Technology
applying to only the
production of peas
Consumer Goods
Increase in
productive capacity
Consumer Goods
Increase in GDP
Production Possibilities Curve
• Name the two assumptions made when drawing the PPF
1. There is a fixed level of technology
2. There is a fixed quantity of resources
When either of these factors change, the PPF will shift
Show the effect of the changes in the following PPF models
Peas
Peas
Carrots
New technology
applying to both
peas and carrots
Capital
Goods
Capital
Goods
Carrots
New Technology
applying to only the
production of peas
Consumer Goods
Increase in
productive capacity
Consumer Goods
Increase in GDP
Aggregate Demand
• AD = C + I + G + ( X –M )
• GDP = ______________________
Consumption increases if
*__________________
*__________________
State what each of the Symbols stand for
C =___________________
I =___________________
G =____________________
X = _________________
M=________________
*_________________
*__________________________
*________________________
Investment increases if
*____________________
*________________________
Imports decrease when
Exports increase when
*_____________________
*_______________________
*_____________________
*____________________________
Aggregate Demand
AD = C + I + G + ( X –M )
• GDP =C + I + G + ( X –M )
Consumption increases if
• Incomes rise
• Income taxes fall
State what each of the Symbols stand for
C = Consumption
I =Investment
G = Government Spending
X = Exports
M=Imports
• Interest rates fall
• Inflationary expectations increase
• Consumer confidence improves
Investment increases if
• Interest Rates fall
• Business confidence rises
Exports increase when
• The exchange rate falls
Imports decrease when
• Incomes in NZ fall
• The exchange rate falls
• Incomes overseas rise
Aggregate Supply
• Define AS ________________________________
• Name the three factors that will cause AS to
The AD/AS model
change
1. __________________
2. __________________
3. __________________
What five factors may cause AS to increase
*_________________________
*_________________________
*_________________________
*__________________________
*__________________________
Aggregate Supply
• Define AS ________________________________
• Name the three factors that will cause AS to
The AD/AS model
change
1. Technology
2. Productivity
3. Cost of imported raw materials
What five factors may cause AS to increase
*Fall in cost of raw materials
* Increase in productivity
*Fall in nominal wages
*Fall in the price of oil
* An appreciation of the exchange rate
Complete the circular flow model below
Name the three Injections into the circular flow
Name the three withdrawals out of the circular flow
• ____________________________
• ____________________________
• ____________________________
• ____________________________
• ____________________________
• ____________________________
Complete the circular flow model below
Name the three Injections into the circular flow
Name the three withdrawals out of the circular flow
• Investment
• Export receipts
• Government spending
• Savings
• Taxes
• Imports
Positive and Negative Impacts of Growth
Group
Positive Impact
Negative Impact
Households
*
*
*
*
*
*
*
*
*
Firms
*
*
*
*
*
Government
*
*
*
*
Environment
*
*
*
*
*
*
*
*
*