Causes of growth Flashcards
1
Q
What is the difference between actual and potential growth?
A
Actual growth refers to the yearly increase in real Gross Domestic Product (GDP), reflecting the economy’s performance over a short period.
Potential growth represents the maximum possible output an economy can achieve when all resources are fully employed and operating efficiently
2
Q
What causes actual growth but not potential growth?
A
Increase in aggregate demand
3
Q
What causes potential growth?
A
investment into more advanced machinery, training the labour force, improvements in the education system and technology
