Economic growth

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Economic Growth

Economic growth is the percentage increase in real national output in a given time period or the increase in the productive potential of the economy. Countries grwo at different rates, this is partly due to the fact that they are at different stages of their economic cycle. The economic growth for the UK is at 0.2%. The main measure of output is gross domestic product (GDP). GDP is the total value of goods and services produced in an economy during one year. Economic growth can be be measured in nominal terms which include inflation, or real terms which are adjusted for inflation. Aggregate supply is the total supply of goods and services that are produced in an economy at a given price level DRAW GRAPGH (AS
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Unemployment rises, confidence and investment are low. Slump is a period where economic growth is very low, high unemployment and almost no confidence and investment. Recovery is a time period where economic growth starts to slowly rise, unemployment falls, confidence and investment being to rise. An output gap occurs when there is a difference between an economies actual and potential output which could result in positive or negative output gaps. A positive output gap occurs when the economy’s actual output is greater than the potential output whereas a negative output gap is when the economy’s actual is less than the potential. Governments try to reduce both gaps to maintain balace. Long run aggregate supple is determined by the quantity of resources available to meet demand and also by the productivity of factors of production. DRAW GRAPH (LRAS) An increase in the quantity and productivity of factors of production or technological advancements shift the LRAS curve outwards. The quantity of resources include increase the size of the labour force or discovery of natural resrouces where as the productivity of resources include increased efficiency due to technological advancements. DRAW GRAPH (LRAS 2) --- If a firm is already operation near its potential output, then moving the AD curve outwards will only increase price is output will remain the same. Economic growth has many benefits, such as
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