Discuss the differences between long-term and short-term economic growth. What are the determents
of long-term growth? Discuss the impact of long-term economic growth and the determinants of it on
business.
The growth of an economy can be either short-term or long-term, and economic growth focuses
on increases in GDP. First, short-term growth, as the name suggests, happens over a short period of time
(usually a year). Long-term growth happens over several years, but both are measured by the growth or
percentage change in the potential output of GDP. Also, living standards are tied to long-run growth. An
increase in GDP means more income and higher living standards.
According to Yili Chen (2015), there are three main factors that drive economic growth;
accumulation of capital stock, increase in labor, and technological advancement. How productively all
three factors can combine to create higher GPD output determines long-run growth. According to
Loretta Mester (2025), other factors that can affect productivity are; labor force growth, skill level of
labor force, infrastructure, rule of law and well-developed financial markets. Growth in technology,
capital, and labor lead to sustained long-run economic growth and increase standards of living.
The impact of long-term economic growth and the determinants of it on business has many
benefits. Some of the benefits are; more jobs, more profits, higher wages, and increase productivity.
However, if economic growth is not balanced, then it can result in inflation and excessive growth. So,
there must be some type of equilibrium between the determinants. I think advancement in technology is
most important to business growth because it leads to better; processes, applications, services, and
development.
Chien, Y. (2015). What Drives Long-Run Economic Growth? Retrieved on December 18, 2017 from
https://www.stlouisfed.org/on-the-economy/2015/june/what-drives-long-run-economic-growth.
Mester, L. (2015). Long-Run Economic Growth. Federal Reserve Bank of Cleveland. Retrieved from
https://www.clevelandfed.org/newsroom-and-events/speeches/sp-20151015-long-run-economicgrowth.
aspx