2.5 Economic Growth Flashcards
What causes economic growth?
an increase in the quality or quantity of one of the FOPs
Actual growth
the percentage increase in a country’s real GDP + caused by an increase in AD
Potential growth
long run expansion in the productive potential of an economy + caused by increases in AS
Negative output gap
occurs when the actual level of output is less than the potential level of output
Positive output gap
occurs when the actual level of output is greater than the potential level of output
Benefits of economic growth (think economic agents)
higher disposable incomes, higher employment, higher profits for firms, fiscal dividend for govt
Cons of economic growth
inflation (dp), income inequality, environmental costs, current account deficit