Economic growth
Increase in real output or productive potential over time.
Economic growth
Key definitions
Actual growth
Short-run increase in real GDP/incomes.
Potential growth
Increase in productive capacity (LRAS shifts right).
Output gap
Difference between actual and potential real GDP.
GDP
Total value of goods and services produced in a period.
GDP per capita
GDP divided by population.
GNP/GNI
GDP plus net income flows from abroad.
Nominal values
Not adjusted for inflation.
Real values
Adjusted for inflation.
PPP
Adjusts GDP for cost of living and exchange rates when comparing countries.
Key concepts
Growth raises living standards if productivity rises, not only if hours worked increase.
Limitations of GDP include inequality, informal economy and environmental damage.
See UK GDP data for essays.
Relevant tips
- Distinguish actual vs potential growth in 8-mark answers.
- Diagram: output gap on AD/AS or trend GDP chart.
Examples & case studies
- UK productivity lag vs peers — links to supply-side policy essays.