What you’ll learn7 learning objectivesChoose one objective for a focused lesson, or study the complete topic.3.3.1Economic growth• Short-term growth includes actual growth in the PPC model and AD-driven increases in real output• Long-term growth includes outward PPC shifts and LRAS-driven increases in full employment output• Economic growth is measured using growth rates• Diagram: PPC showing actual growth and growth in production possibilities• Diagram: AD increase showing higher real output• Diagram: LRAS increase showing higher full employment output• Calculation: economic growth rate from dataSyllabus objective3.3.2Consequences of economic growth• Growth can affect living standards, the environment, and income distribution• Evaluation requires weighing benefits against costs and sustainability concernsSyllabus objective3.3.3Low unemployment• Unemployment rate measures unemployment relative to the labour force• Measuring unemployment can be difficult• Causes include cyclical, structural, seasonal, and frictional unemployment• Natural unemployment is the sum of structural, seasonal, and frictional unemployment• Costs include personal, social, and economic costs• Calculation: unemployment rate from data• Diagram: minimum wage causing unemployment• Diagram: fall in demand for labour in a market or region• Diagram: deflationary gap showing cyclical unemploymentSyllabus objective3.3.4Low and stable inflation• Inflation is measured using CPI data• CPI has limitations as an inflation measure• Inflation can be demand-pull or cost-push• High inflation creates uncertainty, redistributive effects, saving effects, export competitiveness damage, lower growth, and inefficient allocation• Calculation: inflation rate from weighted CPI data• Diagram: demand-pull inflation• Diagram: cost-push inflationSyllabus objective3.3.6Deflation and disinflation• Deflation can be caused by changes in AD or SRAS• Disinflation is a fall in the inflation rate; deflation is a fall in the price level• Deflation costs include uncertainty, redistributive effects, deferred consumption, cyclical unemployment, bankruptcies, higher real debt, inefficient allocation, and policy ineffectiveness• Diagram: deflationSyllabus objective3.3.7Inflation versus unemployment• Policymakers compare the relative costs of unemployment and inflation• Trade-offs may appear between low unemployment and low inflationSyllabus objective3.3.10Conflicts between macroeconomic objectives• High economic growth may conflict with low inflation• High growth may conflict with environmental sustainability• High growth may conflict with equity in income distributionSyllabus objective