The importance of long-run economic growth

What is long-run economic growth?

The sustained increase in an economy’s production capacity or potential output over time.

How is an increase in economic growth shown on a PPF curve?

A shift of the whole frontier to the right

How is an increase in economic growth shown on the LAS curve?

A shift of the LAS curve to the right

Why is long run economic growth important?

It will cause living standards to increasing over time measured by an increase in both quantity and quality of goods and services.

How do you measure the growth in living standards over time?

Measures using real GDP per capita

What is the trend in real GDP and real GDP per capita in Australia?

Real GDP per capita is growing at a slower rate compared to real GDP

Why is real GDP per capita growing slowly?

The population of Australia is growing faster than GDP

Why is it bad that real GDP per capita is growing so slowly?

Future living standards will not rise as quickly as in previous decades.