Economic growth

• Define Economic growth: Economic growth occurs when a country achieves an increase in GDP. This means there is a rise in economic activity, and there are more goods/ services for people to consume.
• What does Economic growth lead to? Economic growth leads to a higher standard of living because people can consume more goods and services.
• Define GDP: Gross Domestic Product is a measure of the total output of an economy.
• What are the two types of economic growth? Short-run economic growth

  Long-run economic growth
• What is Short-run economic growth? Also known as actual growth- the actual annual percentage increase in an economy's output within a year, as measured by % change in GDP.
• When does Short-run economic growth occur? Short-run economic growth occurs when more of an economy's existing resources are used. If more people are employed, or more existing plant and machinery is used to produce more good and services, then the economy moves closer to its productive potential.
• What is Long-run economic growth? Also known as potential economic growth or the economy's productive potential- the rate at which the economy's output could potentially grow as a result of increase in the economy's productive capacity.
• When does Long-run economic growth occur? Long-run economic growth occurs when there is an increase in an economy's productive capacity, meaning an increase in real output.
• What does Long-run economic growth require? Either an increase in quality or an increase in quantity.
• How can Long-run economic growth be increased? 1. An increase in the quantity of factor inputs e.g. labour force, land, capital through investment or physical capital.

  2. An increase in the quality of factors of production therefore raising productivity.

  3. An increase in the efficiency with whichever factor imports are used e.g. better quality labour leads to higher output.
• What are the 4 factors of production? Land

  Labour

  Capital