We examine impacts on the expansion of the supply
side of the economy and of potential Gross Domestic
Product (GDP). This expansion could be an increase in the
annual growth rate, a one-time increase in the size of the
economy that does not affect the future growth rate but
puts the economy on a higher growth path, or both. Our
focus on the supply side of the economy and the long
run is in contrast to the short-term phenomenon, also
called “economic growth,” by which a boost in aggregate
demand, in a slack economy, can raise GDP and help align
actual GDP with potential GDP.
We examine impacts on the expansion of the supply
side of the economy and of potential Gross Domestic
Product (GDP). This expansion could be an increase in the
annual growth rate, a one-time increase in the size of the
economy that does not affect the future growth rate but
puts the economy on a higher growth path, or both. Our
focus on the supply side of the economy and the long
run is in contrast to the short-term phenomenon, also
called “economic growth,” by which a boost in aggregate
demand, in a slack economy, can raise GDP and help align
actual GDP with potential GDP.
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