2.1.1 Economic Growth

Question 1

What is Economic Growth?

Answer 1

• A measure of an increase on Real GDP (Gross Domestic Product)
• Potential Economic Growth is a measure of the increase in capacity in an economy

Question 2

What is Gross Domestic Product (GDP)?

Answer 2

• Measures the quantity of goods and services produced in an economy.
• A rise in economic growth means there has been an increase in national output.

Question 3

What is Real Gross Domestic Product (GDP)?

Answer 3

• The value of GDP adjusted for inflation.

For example;
if the economy grew by 4% since last year, but inflation was 2%, real economic growth was 2%.

Question 4

What is Nominal Gross Domestic Product (GDP)?

Answer 4

• The value of GDP without being adjusted for inflation.

In the above example, nominal economic growth is 4%. This is misleading, because it can make GDP appear higher than it really is.