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According to the Harrod–Domar model there are three kinds of growth: warranted growth, actual growth and natural rate of growth. Warranted growth rate is the rate of growth at which the economy does not expand indefinitely or go into recession. Actual growth is the real rate increase in a country's GDP per year.
Natural (physical, etc) and institutional constraints impose limits to growth. If actual GDP rises and stays above potential output, then, in a free market economy (i.e. in the absence of wage and price controls), inflation tends to increase as demand for factors of production exceeds supply.
The calculation for the output gap is (Y–Y*)/Y* where Y is actual output and Y* is potential output. If this calculation yields a positive number it is called an inflationary gap and indicates the growth of aggregate demand is outpacing the growth of aggregate supply—possibly creating inflation; if the calculation yields a negative number it is called a recessionary gap—possibly ...
The economic growth rate is typically calculated as real Gross domestic product (GDP) growth rate, real GDP per capita growth rate or GNI per capita growth. The "rate" of economic growth refers to the geometric annual rate of growth in GDP or GDP per capita between the first and the last year over a period of time. This growth rate represents ...
Computable general equilibrium (CGE) models are a class of economic models that use actual economic data to estimate how an economy might react to changes in policy, technology or other external factors. CGE models are also referred to as AGE (applied general equilibrium) models. A CGE model consists of equations describing model variables and ...
The actual usefulness of a product (its use-value) is not measured – assuming the use-value to be any different from its market value. Three strategies have been used to obtain the market values of all the goods and services produced: the product (or output) method, the expenditure method, and the income method.
The figure below illustrates the movement of potential output (output at full employment), actual output and wages over time. As can be seen the Goodwin model can generate endogenous fluctuations in economic activity without relying on extraneous assumptions of outside shocks, whether on the demand or supply side.
According to Kaldor, “The purpose of a theory of economic growth is to show the nature of non-economic variables which ultimately determine the rate at which the general level of production of the economy is growing, and thereby contribute to an understanding of the question of why some societies grow so much faster than others.” [2] [1]