causes of economic growth (long + short) Flashcards
what is economic growth
economic growth is an increase in Real GDP in an economy in a year caused by an increase in aggregate demand or an increase in LRAS
short run growth
an increase in AD. using spare capacity to increase real gdp
aggregate demand equation
C + I + G + (X-M)
Causes of short term economic growth
lower interest rates
lower income / corporation tax
higher consumer / consumer confidence
higher gov spending
weaker exchange rate
what is long run growth
an increase in LRAS (increase in the productive capacity of the economy)
causes of long run growth
increase quantity of FoPs
Quality of Fops
Increase productive effieciency
how to cause long run growth
increase labour productivity
increase in workforce size
investment
infrastructure improvement
increase in competition
new resource discoveries
