Economic growth is an increase in real GDP over time.
Our example (made-up numbers)
| Year | Real GDP (€ billion) | Growth rate |
|---|---|---|
| 2024 | 21,500 | – |
| 2025 | 22,145 | 3.0% |
The points to remember
- Growth rate = (new real GDP − old) ÷ old × 100: (22,145 − 21,500) ÷ 21,500 × 100 = 3%.
- Use real GDP: nominal growth includes inflation.
Two kinds of growth
Short-term (actual) growth
Output rises as idle resources go back to work.
Long-term (potential) growth
The economy can produce more: capacity grows.
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A production possibilities curve (PPC) shows both kinds.
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Remember it as: Short term: move to the curve. Long term: move the curve.
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Growth is not free: it has winners, losers and side effects.
What growth brings
| Good consequences | Bad consequences |
|---|---|
| Higher incomes: more goods and services per person | Pollution, emissions and used-up resources |
| More jobs: unemployment falls | Income may grow faster for the rich: more inequality |
| More tax revenue for schools, hospitals, roads | AD racing ahead of capacity: inflation |
Weigh it up: Judge with conditions: what kind of growth, for which country, and what the government does with the gains.
Paper 1 asked this in November 2024, as part (b) for 15 marks.
Using real-world examples, discuss whether the costs of economic growth are greater than the benefits.
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See the answer broken into clear points, with guidance on how each point earns marks.
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How the 15 marks are given
| Marks | What your answer needs |
|---|---|
| 13–15 | Theory fully explained, terms right all the way through, balanced evaluation, real examples fully developed to support the argument |
| 10–12 | Theory explained, terms mostly right, evaluation mostly balanced, real examples developed |
| 7–9 | Theory partly explained, some evaluation but one-sided, examples partly developed |
| 4–6 | Theory only described, evaluation superficial, examples only named |
| 1–3 | Theory stated but not relevant, no evaluation |