economic and technical

• loss of output and welfare
• increased unemployment
• strain on government budgets
• negative outlook and pessimism
• may cause deflationary spiral

actual:

• % annual increase in equilibrium national income
• short run -> determined by growth in AD and/or increased SRAS

potential:

• % annual increase in capacity of economy to produce
• determined by incr. LRAS (i.e. incr. productive capacity)
• long run -> determined by supply-side factors

when actual > potential, idle resources and unemployment decreases, incr. inflationary pressure

when potential > actual, leads to incr. spare capacity and unemployment, hence incr. gap between potential and actual output

• fiscal policy (encourage investment and technological improvements
• monetary policy
• aggregate ss-side policies

• ss-side factors (incr. qqt of fop
• dd-side factors
• structural factors
• external factors

benefits:

• incr. level of consumption, incr. material sol
• helps avoid other macroeconomic problems
• enables easier redistribution of income
• society can afford to care more for the environment

costs:

• current opp. cost of growth
• environmental costs, depletion of non-renewable resources
• effects on income distribution
• effects on unemployment
• social effects
• impact on balance of payments

measured by % change in real GDP