Economic Growth

In: Business and Management

Submitted By hanyuanjie
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Economic growth is increases in output. It can occur if previously unemployed resources are employed, there are more resources or existing resources improve in quality (Grant and Stanlake, 2000:285). According to the report, the economic gap between the north and the south of the United Kingdom was significantly enlarged in 10 years (White, 2015). Regional outcomes in Britain have exhibited strong signs of divergence and asymmetries on the basis of a North-South divide for over twenty years (lse.ac.uk, 2006). The purpose of this essay is to examine the regional imbalance in the United Kingdom. After first explaining measurable growth by some economic theories, it will analyse actual and potential growth by drawing business cycle and LRAS diagrams. Next, it will analyse the reasons for regional imbalance. Finally, it will evaluate actual supply side policies.

Real GDP measures the value of goods and services produced at constant prices, the change of the real GDP only reflects the change of the quantity of production. In addition, people prefer to use real GDP than nominal GDP because real GDP reflects the economy’s ability to satisfy people’s needs and desires (Mankiw and Taylor, 2011:496-497). According to below graph, it shows that UK economy has experienced up-and-down swings in the years since 2003. Before 2008, growth more stable between 0.2 and 1.8 per quarter. However, GDP is more unpredictable after 2009. (Source: BBC news, 2015)

The first type is actual growth which refers to “the annual percentage increase in national output produced and measures in real terms” (Bond and Hughes,1994:85).

The diagram below shows that the phase of business cycle and how real GDP behaves over a hypothetical business cycle. Dwivedi (2010:409) notes that “business cycle refers to a period of high growth and prosperity in the economy followed by a period of sharp economic…...

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