4.4.1 Meaning of economic growth
Definition: Economic growth is an increase in a country's real GDP over time. In the short run it is actual growth: output rises towards the productive potential (movement towards the PPC). In the long run it is an increase in potential output, shown by an outward shift of the PPC or LRAS.
Figure: Economic growth and the business cycle
Example: India's real GDP grew at around 6–8% a year in recent years, among the fastest of major economies.
Analysis chain (AO2): Rise in AD with spare capacity → actual growth (moving towards the PPC); rise in quantity or quality of resources → potential growth (PPC/LRAS shifts out) → sustained growth needs both.
Evaluation (AO3):
- High growth does not guarantee higher living standards for all; it depends on how income is distributed.
🔒 Also in the full notes
- 4.4.2 Measurement of economic growth
- 4.4.3 Nominal GDP and real GDP
- 4.4.4 Causes of economic growth
- 4.4.5 Consequences of economic growth
- Exam practice: 5 practice questions
- 2 exemplar answers with full model answers and mark breakdowns