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| Question | Answer |
| Economic Growth John Maynard Keynes theory of Aggregate Demand AD= C+I+G(X-M) I=Investment G=Government Spending X=Exports M=Imports | Y=C+S+T C=Consumption S=Savings T=Taxation Y= Total level of income in an economy over a given period of time (National Income) |
| Y=AD S+T+M=I+G+X economy is at equilibrium Injection=Leakages (withdrawals) | When : I>L - Upswing L>I - Downturn |
| Define Economic Growth | Economic growth refers to the increase in volume of goods and Services produced in an economy in a year, measured by annual rate of change in Real GDP |
| Define Real GDP | Refers to the percentage increase in value of goods and services produced in a year adjusted for inflation rate |
| Formulae for Economic Growth | Real GDP Current yr - Real GDP Previous yr -------------------------------------------- Real GDP Previous yr |
| Formulae for Real GDP | Nominal GDP x 100 ----------------------- CPI |
| What is the Simple multiplier | Changes in AD influences economic Activity once equilibrium has been disrupted, economy will find a way to move to a new equilibrium |
| Formula's for Multiplier Process | change AD x K = change in Y nat income to find K K=1/MPS or K=1/1-MPC |
| Source and effect of Economic growth | Change in AD = Change in Economic Growth |
| What are the factors that influence AD and Economic Growth ? | Consumption Investment Government Spending Export + Imports Domestic & Global Economic growth Domestic & global income levels Exchange rates Terms of Trade International Competitiveness |
| How does Consumption impact Eco Growth? | 60% of AD determining economic growth through - Disposable income - Distribution of income - Consumer expectation - Level of Interest Rates |
| Discuss about Disposable Income | Major factor that influences consumption if the level of income is high - Spending is High leading to consumption looks at APS + APC |
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