Economic Growth Causes

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  • Economic growth
    • the % increase in goods and services produced by the economy
    • Causes (actual growth)
      • Investment in physical (machinery) and human (workers) capital
        • Net Investment - enlarges physical and human capital
        • Technical Progress - better quality of capital goods (machinery) - increase capital productivity - higher labour productivity
      • Increase consumer confidence - more consumption (vice versa)
      • Increase gov spending - increase AD (vice versa)
      • Increase AS - production costs fall - more competitiveness - cheaper/deregulation - more consumption
    • Short run makes use of spare capacity and takes up slack in the economy
    • Long run increases total productive capacity
    • Measured
      • GDP
    • Causes (potential growth)
      • Only occurs when AS increases - economy output increases

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