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Potential GDP and Trend Growth

Level:
A-Level, IB Diploma
Board:
AQA, Edexcel, Eduqas, IB, OCR, WJEC

Last updated 30 Mar 2021

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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.

Potential GDP and Trend Growth
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