Syllabus: The meaning of economic growthSyllabus: Define economic growth as an increase in real GDP.
You need to be able to distinguish between actual economic growth and potential economic growth.
Actual economic growth occurs when measured National Income (GDP) increases so there has been an increase in goods and services produced by the economy and this is often referred to as the headline growth rate since it is what the media are always reporting.
growth is when the productive capcity of the economy increases so the
economy could produce more goods and services at capacity level than it
could at a previous and lower capacity level. It is not to say more
goods and services are actually produced though.
As we saw in the previous section, there are various measures of national income; GDP and GNP being two of these. GDP considers all output that has been domestically produced, whereas GNP takes into account net property income from abroad or paid abroad.