2.5.1: Causes of Economic Growth

Question 1

What is economic growth?

Answer 1

• the increase in production of goods and services in an economy

Question 2

What is actual growth?

Answer 2

• The percentage increase in a country’s real GDP/ output (annually)
• Driven by rising AD

Question 3

What is potential growth?

Answer 3

• What the economy could produce if resources were fully employed

Question 4

What are the two ways for economic growth?

Answer 4

1. An increase in one of the components of AD
2. A shift right of the LRAS

Question 5

Examples of a right shift in LRAS

Answer 5

• Education and training to improve labour productivity
• Innovation and Technological Change
  -Economic Migration
• Export led growth
• An increase in productive potential

Question 6

Factors causing short-run growth

Answer 6

• Increase in factors in AD