Long Run Economic Growth Flashcards, test questions and answers

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What is Long Run Economic Growth?

Long Run Economic Growth is the sustained increase in a nation’s output of goods and services over an extended period of time. It is measured by the annual percentage change in real Gross Domestic Product (GDP) per capita, which adjusts for inflation. Long Run Economic Growth occurs when there are improvements to the factors of production such as labor, capital, technology and natural resources that lead to increased output.There are multiple factors involved in achieving long run economic growth. On the demand side, investment and consumer spending play important roles in driving economic growth. Investment leads to increases in productivity which can raise output over time. Consumer spending can also drive up demand for goods and services which increases incomes and boosts economic activity. On the supply side, increased productivity from technological advancement is a major driver of long run economic growth. Technological advances such as artificial intelligence and robotics have enabled businesses to produce more with fewer resources while improving quality standards and reducing costs at the same time. Additionally, advancements in communication technology have allowed businesses to increase their global reach while reducing transaction costs associated with international trade making it easier for firms to expand their markets abroad increasing their output potential at home as well as abroad In addition to these factors investment in human capital is another important factor related to long run economic growth because investments made today will contribute towards improved productivity levels tomorrow by creating a larger pool of skilled workers who are knowledgeable on how best utilize available resources leading higher levels of efficiency from each unit of input used resulting higher levels of GDP per capita over time. Furthermore education also provides individuals (especially those from lower socio-economic backgrounds) access better opportunities allowing them greater freedom when deciding upon future career paths leading them more likely pursue higher paying jobs or even become entrepreneurs driving up aggregate demand thus further boosting economic growth. In conclusion Long Run Economic Growth requires improvements across multiple fronts including both demand-side investment as well as supply-side technological innovation coupled with investments into human capital providing individuals access better opportunities allowing them become more productive members society leading higher standard living overall population .