Economic growth

Economic growth

An increase in the total output of goods and services (real GDP) in an economy over time.

Actual growth

An increase in actual output (real GDP) through time.

Potential growth

An increase in potential output (or production possibilities). It refers to a rightward shift of LRAS curve or an outward shift of PPC.

Consequences of economic growth

Advantages:

• Living standards are higher
• Low cyclical unemployment

Disadvantages:

• More stresses & less leisure time
• Structural unemployment

Growth rate

Growth rate = (Real GDP2 - Real GDP1)/(Real GDP1)×100%

Equality and Equity

Equality in distribution of income = a narrow wealth gap

Equity in distribution of income = fairness

Equity ≠ equality