A2 macroproblems alevel 经济

1、Macroeconomic ProblemsBy aprilEconomic Growth & PPCCapital goodsConsumer goods A B: actual growth PPC1 PPC2: potential growth A B PPC1PPC2Actual Growth VS. Potential GrowthActual growthPotential growth1 Short-runLong run2 Movement from inside to on PPCShift rightward3 Achieved by better utilizat

2、ion of current factors of productionAchieved by increasing quantity and quality of factors and technologyWays to improve Potential GrowthQuantity increased by:Quality by:Labor Population growth by natural increase & net immigrantsEducation & trainingEnterprise Government policies. E.g. cutti

3、ng taxesEducation & trainingCapital Investment increased due to an increase in AD Technology advance through R&DLand New discoveries & armed conflictFertilizer, irrigation and drainageObstacles to increase Quantity, Quality & Technology Difficult to improve quality of labor due to la

4、ck of schools, teachers and textbooks High opportunity cost of increasing capital at the expense of current consumption in the country Moreover, debt problem if capital is acquired from abroad on loans Expensive to undertake R&D with benefits in the medium to long termBenefits of Economic Growth

5、 Rising material living standard thanks to more goods and services More state benefits given to the poor through extra tax revenue Increasing business and consumers confidence leading to further growth Increasing a countrys international prestige and powerCosts of Economic Growth Opportunity cost of

6、 economic growth in the short run, if the economy is at its full employment Working hours, pressure and anxiety may be increased Depletion of natural resources and damage to the environment Sustainable DevelopmentEconomic Growth VS. Economic DevelopmentEconomic GrowthEconomic GrowthEconomic Developm

7、entEconomic Development1Is the actual annual percentage change in outputIs improving peoples economic well-being and quality of life2Measured by increase in GDP per capitaMeasured by higher incomes, better education & health and nutrition, less poverty, cleaner environment, more equality, greate

8、r individual freedom and richer cultural lifeIndicators of Comparative DevelopmentCharacteristics of Developed & Developing EconomiesPopulation growth and population structureIncome distributionUnemploymentExternal tradeUrbanizationTechnologyMNCs and FDIExternal debtPopulation growth & popul

9、ation structureDeveloped economiesDeveloping economies low natural increase/ natural decline with increasing immigrants low fertility rates high dependency ratios due to a lot of old people ageing population high natural increase high fertility rates high dependency ratios due to a large no. of youn

10、g people ageing population The concept of Optimum Population2. Income distribution& 3. Unemployment Income is less evenly distributed in developing countries developing countries tend to suffer from higher unemployment due to surplus population and shortages in land, capital and enterprise4. Ext

11、ernal trade Developing economies: reliance upon the export of primary products severe price fluctuation due to inelastic PED & PES failure in benefiting from global economy growth as demand is income inelastic tendency of trade of primary goods to decline with increase in manufactured goods E.g.

12、 china 5. Urbanization &6. Technology Developing economies: Very rapid rural-urban migration Pressure on infrastructure, housing, roads and schools in urban areas Lack of new production techniques, technical skills, more efficient communication, etc7. MNCs and FDI8. External debt Heavily indebte

13、d poor countries (HIPC): If the proportion of debt service ratio exceeding 80% of GNP If the present value of debt service is 220% of exports Heavily indebted countries have to divert resources to debt repayment and away from spending on infrastructure, education and health care, etc Unemployment Rela