Cambridge International as and a level Economics Ebook

SELF-ASSESSMENT TASK 9.5
China’s economic growth rate fell in 2013 to 7.5% 
from 7.8% in 2012. Th
e economy’s domestic demand 
would have supported a 9% growth rate, largely 
driven by investment. Weak exports due to the 
strength of the currency reduced the growth rate.
1
What is meant by a fall in a country’s economic 
growth rate?
2
Explain how investment may promote economic 
growth.
3
Discuss whether a high exchange rate will reduce 
a country’s economic growth rate.
227
Chapter 9: The macroeconomy 

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Even if people are able to enjoy more consumer goods 
and services, it does not necessarily mean that they will 
be happier. As access to more and higher-quality products 
rises, the desire for even more and better products may 
increase at even faster rate. For example, people who do 
not have a car are happy when they buy their fi rst car but 
oft en, within a short space of time, they want a better 
model. Th
is has particular implications for people in 
China and India where incomes and car ownership are 
increasing rapidly.
Real GDP measures the quantity of output produced 
but not the quality. Output could rise but if the quality of 
what is produced declines then the quality of people’s lives 
is likely to fall. In practice, however, the quality of output 
tends to rise over time.
Working conditions also tend to improve over time and 
working hours usually fall. If real GDP per head stays constant 
from one year to the next but working conditions rise and/or 
working hours fall, people’s living standards will rise.
Although workers tend to enjoy improved working 
conditions over time, the quality of the environment 
in some countries declines as a result of pollution and, 
for example, deforestation. A decline in environmental 
conditions will lower living standards but not necessarily 
real GDP. Indeed, if more resources have to be devoted to 
cleaning up the environment, real GDP will increase while 
living standards decline.