The Causes of Economic Growth
- In the short run, if an economy’s operating with spare capacity, economic growth can occur due to an increase of AD
- This can be things like consumption lead growth, export lead growth, etc.
- Net investment has a different effect on economic growth, as it not only increases AD, but AS as well
- This enables long-run economic growth, as the productive capacity of the economy’s increased.
- The essential causes of long-run economic growth are the increases in the quantity and/or quality of resources.
- The main causes of an increase in the quality of an economy’s resources are advances in technology and improvements in education and training.