In this video we look at two important macroeconomic concepts – namely potential GDP and trend growth.
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.
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.
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