Economic Growth

Question 1

Cause of SREG

Answer 1

In the short run, primary cause of economic growth is AD, this leads to actual economic growth

Question 2

Another cause of SREG

Answer 2

an increase in SRAS

Question 3

Causes of LREG

Answer 3

• Export-Led growth
• An expansion of supply factor inputs (e.g. a rise in labour supply)
• improvements in production tech
• increased productivity
  (For LREG to occur, there needs to be an increase in the productive capacity of the economy. This leads to potential economic growth.

Question 4

What are the three diagram used for LREG

Answer 4

1. Classical LRAS curve
2. PPF curve
3. economic trade cycle diagram

Question 5

Significant factors causing EG

Answer 5

• Investment (in capital goods)
• Innovation (of products and processes)
• Immigration (increased productive capacity)
• Changes in birth rates (increased birth rates will lead to a right LRAS shift)
• Increases in productivity
• Export-led growth (greater investment in capital)

Question 6

What is actual economic growth

Answer 6

In the short run, the primary cause of EG is an increase in AD, this is actual EG

Question 7

What is potential economic growth

Answer 7

An increase in productive capacity of the economy, an increase in LRAS, that is potential EG.