Economic growth is where the productive capacity of the economy is increasing. The principal indicator of economic growth is the rate of change for real national income.
Real national income takes into account the impact of inflation on the growth rate
Economic Growth & PPF
Economic growth has caused a shift in the original PPF from PPF1 to PPF2
This shift means more of all goods are now able to be produced in the economy
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Rate of Economic Growth
Rate of economic growth is influenced by:
- Labour supply
- Productivity of labour
- Productivity of capital
- Investment in capital
- Technology
- Resource availability
The key to improving the rate of economic growth is to improve the factor productivity of factors of production
Supply Side Policies & Economic Growth
Supply side policies can be used to attempt to influence the underlying long term trend of economic growth
By moving the LRAS curve outwards these policies aim to increase the level of economic growth in the country
