These real shocks are to be distinguished from discretionary fiscal and monetary policies. The government must finance its spending through taxes, borrowing, or changes in the money supply. If the government cannot or will not borrow and deficits continue, monetary policy must be inflationary. Economic growth means a shift rightward of the aggregate supply curve, increasing the potential output of the economy. The faster the growth of productive resources and technological advancement, the higher a country's growth rate will be.
Productivity is one way to look at the impact of advances in technology on economic growth.
Productivity is the ratio of output produced to the amount of input used. Improvements in technology mean that productivity increases as we find new and better ways to use inputs to produce output. Economic growth is the sum of the growth rate of total factor productivity and the growth rate of available resources. Economic Resource Links Copyright Houghton Mifflin Company . All Rights Reserved.