Economic growth is an increase in real GDP over time.
Our example (made-up numbers)
| Year | Real GDP (€ billion) | Growth rate |
|---|---|---|
| 2024 | 800 | – |
| 2025 | 824 | 3.0% |
The points to remember
- Growth rate = (new real GDP − old) ÷ old × 100: (824 − 800) ÷ 800 × 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.
Free preview
This is the free notes preview
You're reading the free notes. Aimnova Pro unlocks the full study experience — and you can try it with your first topic free to keep:
- FlashcardsLock in vocabulary and key terms with spaced repetition.
- Practice questionsAnswer exam-style questions and get instant AI marking.
- Mock exams & past-paper vaultSit full mocks and see exactly how examiners award marks.
- Personalised study planA daily plan built around your exam date and weak areas.
A production possibilities curve (PPC) shows both kinds.
Animated graph
Watch the graph build step by step in study mode.
Remember it as: Short term: move to the curve. Long term: move the curve.
Stop wasting time on topics you know
Our AI identifies your weak areas and focuses your study time where it matters. No more overstudying easy topics.
Growth brings gains, and costs.
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 (a) for 10 marks.
Explain the difference between the causes of short-term economic growth and long-term economic growth.
Model answer plan
See the answer broken into clear points, with guidance on how each point earns marks.
Animated graph
Watch the graph build step by step in study mode.
What the diagram must show
- Axes: capital goods and consumer goods.
- A point inside PPC1 moving onto it (short term).
- PPC2 outside PPC1 (long term).
How the 10 marks are given
| Marks | What your answer needs |
|---|---|
| 9–10 | Theory fully explained, terms used correctly all the way through, the diagram included and fully explained |
| 7–8 | Theory explained, terms mostly right, the diagram included and explained |
| 5–6 | Theory partly explained, some terms, the diagram included |
| 1–4 | Theory only described or stated; few relevant terms |