1. Understanding, Measuring, Shaping
Economic Growth
Understanding, Measuring, Shaping

2. Fundamental Questions of Growth
How important is economic growth?
How does an economy grow?
What policies promote economic growth?

3. Nature of Growth SHORT RUN LONG RUN Changes in Capacity
Shifting how we use the production resources we already have
LONG RUN
To achieve large and lasting increases in output _____________

4. Focus on Aggregate Supply
Short-run growth policies focus on shifting the Aggregate Demand curve
Demand-side policy fundamentally limited by Aggregate Supply curve
Short Run: slope of AS curve ties inflation to growth
Long Run: position of AS curve limits maximum possible output
Sustained increases in output are only possible if the AS curve shifts to the right

5. DON’T FORGET!!! Nominal vs. Real GDP Definition of nominal GDP:
Definition of real GDP: