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 is a negative externality and how can it be corrected?


Why do markets fail?


Discuss whether or not increasing competition in the provision of air transport services is beneficial to passengers.


What are the characteristics of a monopolistic market?