Economic Growth - How potential GDP grows
3 important questions on Economic Growth - How potential GDP grows
Which models do we use to determine potential GDP?
- An aggregate production function
- An aggregate labour market
What is the aggregate labour market?
One large labour market that determines quantity of labour employed and quantity of real GDP produced with 3 main factors: labour demand, labour supply and labour market equilibrium.
Potential GDP on a graph?
Labour hours (x-as) and real GDP (y-as)
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