Economic Growth

Economic Growth

• An increase in the value of real output

• it is an increase in real output that is caused by an increase in AD

• It is an increase in the productive capacity of an economy

• It's the different between actual and potential growth

Actual Economic Growth

• An increase in the value of real output

• it is an increase in real output that is caused by an increase in AD

• It is an increase in the productive capacity of an economy

• It's the different between actual and potential growth

Potential Economic Growth

• An increase in the value of real output

• it is an increase in real output that is caused by an increase in AD

• It is an increase in the productive capacity of an economy

• It's the different between actual and potential growth

Output Gap

• An increase in the value of real output

• it is an increase in real output that is caused by an increase in AD

• It is an increase in the productive capacity of an economy

• It's the different between actual and potential growth

Economic Growth (AD)

• • - increase in consumption

    • - increase in investment

• • increase in gov expenditure

    • - increase in net exports

• • - increase in investment

  • - new technology

• • increase in net migration

  • - supply-side policies

Economic Growth (LRAS)

• • - increase in consumption

    • - increase in investment

• • increase in gov expenditure

    • - increase in net exports

• • - increase in investment

  • - new technology

• • increase in net migration

  • - supply-side policies

Limitations of Economic Growth

• A lack of access to fund for investment

• Corrupt government

• Currency instability/ Overvalued exchange rate

• Poorer quality human capital

• protectionism by other countries limiting free international trade

Importance of international trade for export-led growth and ways to improve

• It's very important for economic growth, because an increase in exports causes the AD curve to shift to the right, with multiplier effect

• Export-led growth is economic growth associated with an improvement in CA and BOP

• Adopt policies to improve productivity and efficiency in export markets.

Actual growth rate of economic growth

• It's the rate at which the real GDP changes from one year to another

• Ir's calculated as the average rate of economic growth over several years.

• it exists when actual growth rates are below potential growth rates

• it's when growth rates are higher than the economy can sustain

Long-term trend rate of economic growth

• It's the rate at which the real GDP changes from one year to another

• Ir's calculated as the average rate of economic growth over several years.

• it exists when actual growth rates are below potential growth rates

• it's when growth rates are higher than the economy can sustain