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Edexcel A-Level Economics Notes | 2.5

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  • Economic growth: an increase in real GDP.
  • Actual growth: an increase in real GDP.
  • Potential growth: an increase in capacity (right shift in LRAS or the PPF).
  • Export-led growth leads to (X-M) increasing, causing AD to shift to the right. It also leads to job-creation and greater business profits, encouraging investment.
  • 😦: over-dependence on the state of another economy
  • Positive output gap: actual growth rate is greater than long run trend growth rate.
  • Negative output gap: actual growth rate is below long run trend growth rate.
  • Economic cycle: boom, downturn, recession, recovery.
  • Boom: positive output gap, high inflation, low unemployment.
  • Recession: negative output gap, low inflation, high unemployment.
  • Economic growth leads to greater aggregate demand, greater job creation, lower unemployment, higher incomes, higher prices, greater investment, greater tax revenue.