15/01/23

Causes of
growth

• Identify factors which can cause economic Do Now

growth What is the multiplier?
• Distinguish between actual and potential growth Formula for multiplier? X2
• Explain importance of international trade for
growth
 Starter
Education and training will shift
the LRAS outwards therefore
improving the productive
potential of the economy.
Questions to consider:
Who should we educate?
What should we teach?
Who should pay?
What might be the difference between
actual growth and potential growth?
• https://www.yo
utube.com/wat
ch?v=dwgMHW
GSW20
 Actual vs Potential
Actual growth – Percentage
increase in a country’s
real GDP/output
(annually)

Potential growth – What

the economy could
produce if resources
were fully employed
Two main ways for economic growth
• An increase in one of the components of AD
• A shift right of the LRAS
A few examples:
1. Education & Training to improve labour productivity - LRAS
2. Innovation & Technological change - LRAS
3. Economic migration - LRAS
4. Export-led growth AD
An increase in one
of the components
of AD
Price level
(Or inflation)
C + I + G + NX
P1 Shift to the right if any of
the above increases

AD AD2

Y1 Y2 (Real GDP/output/income)

Aggregate demand shifting outwards

A shift right of the
LRAS
• What causes LRAS 1 LRAS 2
shifts right to
the LRAS?
P1

P2

AD

Y1 Y2
 An increase in productive potential
An increase in the quantity
or quality of resources
shifts the curve outward B
• Better A
machinery/technology has
been discovered,
• Workers have become
skilled through training etc.
Bangladesh the next China? Causes
of growth?
• https://www.yo
utube.com/wat
ch?v=L7OTDHy
UnBw

https://www.youtube.com/watch?v=
WSKLrGJyELE
- Singapore
 The importance of international trade for
export led growth
Countries can specialise
where they have a
comparative
advantage

(a lower opportunity cost

than another country)
Evaluate the importance of international
trade for Bangladesh’s economy
• https://www.yo
utube.com/wat
ch?v=44DKf6Gv
gsE
and
https://www.yo
utube.com/wat
ch?v=l26PHkIL-Y
 Research task
• Research a country that has
potential for export-led growth or
already has high export-led
growth

• Where does the growth come

from (industry)
• What is the outlook for the future https://commons.wikim

like?
edia.org/wiki/File:Cartoo
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