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Economic Growth and Inflation | Finance Train

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Aggregate Output, Prices and Economic Growth

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17 lessons0%

Gross Domestic Product

Methods of Calculating GDP

Nominal Vs. Real GDP

GDP, National Income, and Personal Income

Relationship Between Saving, Investment, Fiscal Balance, and Trade Balance

The IS Curve

The LM Curve

Aggregate Demand Curve

Aggregate Supply Curve

Shifts in Aggregate Demand Curve

Shifts in Supply Curve

Macroeconomic Equilibrium

Economic Growth and Inflation

Business Cycle and Economics

Impact of Changes in Aggregate Supply and Demand

Sources, Measurement, and Sustainability of Economic Growth

The Production Function

Course Resources

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Lesson 13 of 17

Economic Growth and Inflation

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We can explain economic growth and inflation using the Aggregate Demand and Long Run Aggregate Supply curves.

Economic growth is the persistent growth in potential GDP, while inflation is the persistent increase in general prices as shown in the graph below:

As you can see both AD and LRAS have shifted to the right. Increase in LRAS brings economic growth. This happens due to increased labour, more capital, or better technology. However, there is a bigger increase in Aggregate Demand (AD), which causes inflation.