2018-02-13
5530
Extensive growth, in economics, is based on the expansion of the quantity of inputs in order to increase the quantity of outputs, opposite to that of intensive growth. For example, GDP growth caused only by increases in population or territory would be extensive growth. Thus, extensive growth is likely to be subject to diminishing returns. It is therefore often viewed as having no effect on per-capita magnitudes in the long-run.
Reliance on extensive growth can be undesirable in the long-run because it exhausts resources. To maintain economic growth in the long-run, especially on a per-capita basis, it is good for an economy to grow intensively; for example, by improvements in technology or organisation, thereby increasing the production possibilities frontier of the economy.
Intensive growth- Increases in aggregate economic activity, or growth, may be generated by adding more labor and capital or by improving skills and technology. Development economists call the latter "intensive growth" because labor and capital work harder. Growth is driven by enhanced productivity (higher output per unit of input) rather than augmented factor supplies. Theory predicts that all growth in a steady-state, long-run equilibrium will be attributable to technological progress (intensive growth). Developing nations may initially grow faster than this "golden mean" rate, benefiting both from rapid capital accumulation (capital deepening) and technological catch-up, but must converge to the golden mean thereafter. During the 1970s many Marxist economists hypothesized that socialist economies were not bound by these neoclassical principles. They forecasted that extensive growth (increased factor supply) would be replaced by socialist–intensive methods ensuring superior performance, but they were mistaken: Growth fell below zero in 1989, heralding the collapse of the Soviet Union two years later.
Explain the phases of the economic(business)cycle?
The business cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real GDP and other macroeconomic variables.
THE PHASES OF THE BUSINESS CYCLE:
While no two business cycles are exactly the same, they can be identified as a sequence of four phases that were classified and studied in their most modern sense by American economists Arthur Burns and Wesley Mitchell in their text Measuring Business Cycles. The four primary phases of the business cycle include:
Expansion: A speedup in the pace of economic activity defined by high growth, low unemployment, and increasing prices. The period marked from trough to peak.
Peak: The upper turning point of a business cycle and the point at which expansion turns into contraction.
Contraction: A slowdown in the pace of economic activity defined by low or stagnant growth, high unemployment, and declining prices. It is the period from peak to trough.
Trough: The lowest turning point of a business cycle in which a contraction turns into an expansion. This turning point is also called Recovery.
These four phases also make up what is known as the "boom-and-bust" cycles, which are characterized as business cycles in which the periods of expansion are swift and the subsequent contraction is steep and severe.
Explain the difference between money and finance?
Money is the stuff you carry around in your pockets. The stuff you use, handle and spend - everyday. It is personal and practical. For example when you buy cup of coffee or a newspaper you usually pay with money (cash) out of your pocket.
Finance is numbers. Usually large numbers.Numbers which you move around by signing pieces of paper. For example when you buy a house, you sign contracts, mortgages and checks. You don't usually pay in cash out of your pocket.
What is the difference between GDP and GNP?
GDP stands for Gross Domestic Product. The term gross domestic product means the total worth of all the goods and services produced in the various sectors of a country. This worth is always estimated in the internationally accepted currency value. GDP is calculated for a period of one whole year, at the end of a country’s financial year. However, for regular assessments and analysis of various short term and long term trends, nations calculate their GDP in the middle of a financial year as well. The GDP can also be called as the sum of all economic activity in a nation. GDP involves an important facility of being calculated on a per capita or per person basis, in order to present a precise picture of the economic development in a country.
GNP is the abbreviation for the Gross National Product. In a simple manner, GNP can be understood as the addition of a country’s profit on overseas investment to its GDP. GNP actually paints a more accurate picture of a country’s economic growth over a period of one year, as it is derived by subtracting the capital gains of foreign nationals and the gains of foreign companies earned domestically, from the annual worth of all the goods and services produced in a country. Along with presenting the figure for the total worth of all business production and service sector industries of a nation, GNP also demonstrates the per capita income of a country. Important factors influencing an economy such as the buying power of an individual from a particular country, an estimate of average wealth, estimation of average wages, ownership distribution in a society, etc. are revealed precisely by GNP.
