What is the difference between short-run and long-run economic growth?

Short-run growth is simply an increase in a country's 'gross domestic product' or 'GDP', whereas long-run growth is an increase in the country's productive capacity. When thinking in terms of an AD-AS diagram, short run growth may be shown by an outward shift in aggregate demand which leads to an increase a long the "GDP" axis. Long run growth may be shown by an outward shift in AS, as this shows an increase in the country's productive capacity.

CH

Related Economics A Level answers

All answers ▸

What do consumer and producer surplus represent?


What is the meaning of the term ‘Wealth Effect’?


Evaluate whether monetary policy is the best method of reducing inflation.


Discuss the effectiveness of fiscal policy to counter recession