2.5.1: Causes of Growth

• Long run economic growth: Increase in potential output
• Short run economic growth: Increase in real GDP
• Anything that increases AD will increase short run economic growth
• Factor causing long run economic growth: Advances in technology
• Factor causing long run economic growth: Increase in the quality and quantity of the factors of production
• Actual growth: Current level of real GDP
• Potential growth: The maximum output that could be produced if the economy were at full capacity
• Factor constraining economic growth: Economic shocks, such as brexit or the financial crisis
• Factor constraining economic growth: Poor productivity, lack of investment
• Factor constraining economic growth: Brain drain, or skilled workers leaving the country for those with better conditions
• Export-led growth: Growth as a result of exporting goods and services
• Balanced growth: When output and capital stock grow at the same rate