How does actual economic growth differ to potential economic growth?

Actual economic growth can also be known as demand side economic growth because it is affected by changes in the demand in an economy.  It is an increase in output as measured by real GDP/ national income. It can be achieved by shifting AD (Aggregate demand)  to the right by increasing AD, by influencing any of the factors of aggregate demand. (As shown below) 


•Government Spending

•Net Exports

* Investment (However this is also a component of LRAS)

On the other hand potential economic growth deals with the supply side of the economy. It is an increase in the productive capacity (potential). An increase in the short term/long term aggregate supply will cause potential economic growth. The short term deals with costs of production and the long term is affected by changes in the quality and quantity of the factors of production. 

Sophie W. 11 Plus Maths tutor, GCSE Maths tutor, A Level Economics tu...

2 weeks ago

Answered by Sophie, an A Level Economics tutor with MyTutor

Still stuck? Get one-to-one help from a personally interviewed subject specialist


James B. A Level Maths tutor, GCSE Maths tutor, 13 plus  Maths tutor,...
View profile
£20 /hr

James B.

Degree: Mathematics and Economics (Bachelors) - Nottingham University

Subjects offered: Economics, Maths


“About me : I am currently studying Maths and Economics at Nottingham University, about to go into my second year. Over the summer I have been in America teaching and counselling kids at a summer camp and I hope to bring what I have le...”

Jay L. A Level Art tutor, GCSE Art tutor, A Level Chemistry tutor, GC...
View profile
£20 /hr

Jay L.

Degree: Mathematics, Operational Research, Statistics and Economics (MORSE) (Bachelors) - Warwick University

Subjects offered: Economics, Maths+ 4 more

Further Mathematics
-Personal Statements-

“Hi! I am currently a fresher at the University of Warwick, studying Maths, Operational Research, Statistics and Economics, or MORSE. I have always enjoyed the challenge of maths and would really like to help you experience joy and sa...”

PremiumTom J. A Level Economics tutor, IB Economics tutor, GCSE Economics tu...
View profile
£24 /hr

Tom J.

Degree: MSc Ecological Economics (Masters) - Edinburgh University

Subjects offered: Economics, Philosophy+ 2 more


“I have fostered a passion for teaching ever since taking the opportunity to travel to China and teach at an English language school for Chinese pupils.  This experience not only massively broadened my horizons culturally, but also gav...”

About the author

Sophie W. 11 Plus Maths tutor, GCSE Maths tutor, A Level Economics tu...
View profile
£20 /hr

Sophie W.

Degree: Political Economy (Bachelors) - Kings, London University

Subjects offered: Economics, Maths


“Hi my names Sophie and I found my love for economics studying it at A- Level. My other subjects were Maths, and Geography.  I am currently studying a degree in Politics and Economics at King's College London. I have a true passion for...”

MyTutor guarantee

You may also like...

Posts by Sophie

Solve algebraically: 6a + b = 16 5a - 2b = 19

Can you explain the difference between joint demand and competitive demand?

How does actual economic growth differ to potential economic growth?

Simplify: 2x + 6y + 2y - x

Other A Level Economics questions

To what extent is the national minimum wage beneficial to society?

What are negative externalities?

What are the Macroeconomic Effects of Currency Fluctuations?

How do I answer an evaluation question?

View A Level Economics tutors


We use cookies to improve our service. By continuing to use this website, we'll assume that you're OK with this. Dismiss