Potential GDP and Trend Growth
- A Level, IB
- AQA, Edexcel, OCR, IB, Eduqas, WJEC
Last updated 30 Mar 2021
In this video we look at two important macroeconomic concepts – namely potential GDP and trend growth.
What is potential GDP?
Potential output refers to an economy's productive capacity in a physical sense. It is the largest output that could be produced, given the prevailing state of technology and stock of available resources. An increase in potential output signifies long-run economic growth.
What is trend growth?
Trend growth is the long term non-inflationary increase in GDP caused by an increase in a country’s productive capacity. The trend rate of economic growth is the average sustainable rate of economic growth over time.