2.5.1

Question 1

Define actual economic growth

Answer 1

A rise in real GDP in a given time period. It is also known as short run growth and is depicted by the aggregate demand curve shifting to the right

Question 2

Define potential economic growth

Answer 2

This is a rise in the productive potential or the capacity of the economy. It is not yet actual growth until AD rises to use up that extra capacit

Question 3

State the factors which could cause economic growth

Answer 3

increase in land, labour, capital, technological progress and efficiency

Question 4

Define long run economic growth

Answer 4

The trend growth rate – mainly determined by changes in the stock of available factor inputs and also improvements in productivity. Trend growth is represented by a rightward shift in the LRAS (or PPF boundary

Question 5

Define short run economic growth

Answer 5

Short run growth is cyclical; the growth of real GDP is determined by aggregate demand (C+I+G+X-M) and also factors affecting short run aggregate supply (SRAS).

Question 6

Define productive potential

Answer 6

Productive capacity of the economy – boosted by high quality capital investmen

Question 7

Define sustainable growth

Answer 7

Growth that meets the needs of the present without compromising the ability of future generations to meet their own needs. Sustainable growth can continue without damage to the environment, or the exhaustion of non-renewable resource

Question 8

Define trend growth

Answer 8

The long run average growth rate – mainly determined by changes in the stock of available factor inputs and also improvements in productivity. Trend growth is represented by a rightward shift in the LRAS (or PPF boundary)