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2.5.1 CAUSES OF ECONOMIC GROWTH - Coggle Diagram
2.5.1 CAUSES OF ECONOMIC GROWTH
TYPES OF ECONOMIC GROWTH
Actual Growth, caused by a change in GDP. AD and AS
Potential Growth, caused by a change in LRAS.
Measured by the trend growth.
ACTUAL ECONOMIC GROWTH
Increase in AD which is caused by a change in the elements
C + I + G + (X-M)
Potential economic growth
Increase of productive potential in an economy.
This is achieved by an increase in the quality or quantity of the factors of production.
LABOUR
Size of the workforce: increased immigration will lead to a higher quantity of labour.
Quality of workforce: investment into education that increases the quality of labour.
LAND
Discovery of oil eg countries like Saudi Arabia would still be developing without the oil.
ENTERPRISE
If the government increases gov grants and decreases taxation this will make more people inclined to start a business.
CAPITAL
If a country gets sustained investment they will have more to invest in greener technology.
EXPORT LED GROWTH- Economists argue that growth can be achieved through increasing exports which increases the next-export element of AD.
This is effective as it allows growth with a neutral balance of payments.
In addition export led growth would make the UK become more efficient.
Countries like China, Japan and Germany have export led growth.