2.5.1

Question 1

Factors which cause economic growth

Answer 1

• improving the labour force, better quality go higher education
• a large labour force, may be due to migration
• improved technology, resources used more efficiently
• more investment, machinery can be bought
• discovering new resources such as oil
• incentive for enterprise such as tax breaks or subsidies

Question 2

Actual growth

Answer 2

The percentage increase in a country’s real GDP and it is usually measured annually
Caused by increases in AD

Question 3

Potential growth

Answer 3

Long run expansion of the productive potential of an economy caused by increases in AS
What the economy could produce if resources were fully employed

Question 4

Comparative Advantage

Answer 4

A country has comparative advantage when it can produce goods and services at a lower opportunity cost than another
Initially increase AD
Encourage firms to invest