A. Growth increases the economy s potential output. Growth is an increase in the amount of goods and services an economy produces 2. The study of growth is the study of why that increase comes about assuming that both labor and capital are fully employed.
Growth is an increase in potential output.
When an economy is at its potential output, it is operating on its production possibility curve. In the short run, economists consider potential output fixed. They focus on how to get the economy operating at its potential if, for some reason, it is not. B. Growth is important for living standards . Long-term growth rates matter a lot because of compounding.