Chapter 3:
Economic growth
3.1 CALCULATING ANNUAL
RATES OF CHANGE
See TABLE 3-1 Growth in South African GDP, 2015 to 2018
(Textbook page 46)
CALCULATING ANNUAL RATES OF CHANGE
The growth rate between any two successive periods,
expressed as an annual rate, can be calculated with the aid of the
following basic formula:
CALCULATING ANNUAL RATES OF CHANGE
CALCULATING ANNUAL RATES OF CHANGE
See BOX 3-1 Quarterly economic growth at a seasonally adjusted annual
rate: handle with care (Textbook page 50)
See BOX 3-2 The impact of data revisions (Textbook page 50)
For worked examples refer to the Textbook pages 47-49
3.2 THE APPROPRIATE BASIS
FOR CALCULATING
ECONOMIC GROWTH
THE APPROPRIATE BASIS FOR CALCULATING ECONOMIC GROWTH
TABLE 3-2 Economic growth and changes in the terms of trade in South
Africa, selected years
THE APPROPRIATE BASIS FOR CALCULATING ECONOMIC GROWTH
TABLE 3-3 Growth in real GDP per capita, real GNI per capita, real GDP
and real GNI, selected periods*
THE APPROPRIATE BASIS FOR CALCULATING ECONOMIC GROWTH
See BOX 3-3 Further comments on per capita data (Textbook page 54)
See BOX 3-4 Further technical issues related to growth rates (Textbook
page 56)
THE APPROPRIATE BASIS FOR CALCULATING ECONOMIC GROWTH
• A nominal aggregate is obviously
inappropriate for expressing economic
growth
• Real GDP ,real GDP per capita ,Real GNI ,real
GNI per capita can be used to calculate
economic growth
• GDP is a geographic concept which
measures the total value of economic
activity within the geographic boundaries of
a country
• GNI measures the total production or income
of the residents of a country on a worldwide
basis
THE APPROPRIATE BASIS FOR CALCULATING ECONOMIC GROWTH
• The difference between the two is the net
primary income to the rest of the world
• If one is interested in the volume of
production within the boundaries of the
country ,Real GDP should be used
• If one is interested in the economic welfare
of the residents of a country Real GNI is
more appropriate
• If the price of an important category of
imported good s(e.g oil) increases .Real GDP
will be unaffected as long as the volume of
oil imports remains unchanged
THE APPROPRIATE BASIS FOR CALCULATING ECONOMIC GROWTH
• Real GNI data indicate the volume of goods
available for domestic consumption ,while
real GDP data indicate the volume of
domestic output
• Real GNI is a better measure of changes in
the economic welfare than changes in real
GDP
• Real GDP remains the most popular basis for
measuring economic growth ,irrespective of
the problems mentioned above
THE APPROPRIATE BASIS FOR CALCULATING ECONOMIC GROWTH
• Although real GDP or GNI can serve as a
yardstick for estimating economic growth
• Neither the rate of change in real GDP nor
the rate of change in real GNI reflects the
impact of economic growth
• This problem can be eliminated by first
expressing real GDP or GNI on a per capita
basis
• Another aspect which requires attention
when growth rates are calculated is the
period for which the calculation is carried out
• Another problem is structural breaks in
growth trends
3.3 GRAPHIC REPRESENTATION
OF ECONOMIC GROWTH
FIGURE 3-1 Typical patterns of semi-logarithmic graphs
GRAPHIC REPRESENTATION OF ECONOMIC GROWTH
FIGURE 3-2 Index of annual real private consumption expenditure, 1970–
2018 (2010 = 100), arithmetic scale
GRAPHIC REPRESENTATION OF ECONOMIC GROWTH
FIGURE 3-3 Index of annual real private consumption expenditure, 1970–
2018 (2010 = 100), logarithmic scale
3.4 ANALYSING ECONOMIC
GROWTH FROM THE
EXPENDITURE SIDE
TABLE 3-4 Annual growth in expenditure on gross domestic product
at constant
2010 prices, 2015–2018
3.5 ANALYSING ECONOMIC
GROWTH FROM THE
PRODUCTION SIDE
Contributions of the different kinds of
economic activity
ANALYSING ECONOMIC GROWTH FROM THE PRODUCTION SIDE
Contributions of the different kinds of economic activity
TABLE 3-5 Rates of change in real contributions of different kinds of
economic activity to gross value added (or GDP) at constant 2010 prices,
2015–2018
ANALYSING ECONOMIC GROWTH FROM THE PRODUCTION SIDE
Contributions of the different kinds of economic activity
TABLE 3-6 Percentage contribution by kind of economic activity to total
gross value added at basic prices, selected years
ANALYSING ECONOMIC GROWTH FROM THE PRODUCTION SIDE
Regional economic growth
TABLE 3-7 Levels and growth of GDP (or GGP) per province, selected
periods
PRACTICE QUESTIONS
Q1
2018 Q1 215
Q2 235
Q3 250
Q4 247
2019 Q1 300
Q2 310
Q3 320
Q4 333
Calculate the growth rate between 2018 Q1 and 2019 Q1.
a) 28.3%
b) 39.5%
c) 279.1%
d) None of the above
QUESTIONS
Question 2
Calculate the growth rate between 2018 Q2 and 2018 Q3.
a) 6.3%
b) 28.0%
c) 15
d) None of the above
QUESTIONS
Q3
Calculate the annualised growth rate between 2018 Q3
and 2018 Q4.
a) -4.7%
b) -1.2%
c) 2.3%
d) None of the above
QUESTIONS
Answers
1 B
2A
3A