Economic Growth - Assignment Example

There are various driving forces contributing to an economic growth, namely, improvement in technology and productivity, increases in the levels of economic activity, efficient Human resource management, greater access to capital resources, etc. Economic growth is essential because it drives the country towards improved standards of living as well as enables it to be in the lead in today’s competitive environment in the international market. (Term, “Economic Growth” from Investopedia) Aggregate Demand is defined by the demand of goods and services that will remain constant at any price level of such goods and services.

The Aggregate Supply-Aggregate Demand Model is a macroeconomic model. This model is basically used to facilitate the analysis and evaluation of the factors that have an impact on the level of Real Gross Domestic Product (i.e. GDP adjusted for inflation) and the level of inflation. This model works on the quantity of output of an entire economy also known as the national production of a country. Below is a pictorial representation of this model: The Real GDP as shown in the above figure represents the quantity of output of the economy.

The equilibrium of the Real GDP is reached at the point where the Aggregate Supply (AS) Curve interacts with the Aggregate Demand (AD) Curve. Furthermore, this equilibrium also determines the national inflation rate. The negative slope of the Aggregate Demand (AD) Curve is as a result of the fact that the purchasing power of a buyer will increase with the reduction in prices at any given level of nominal income. While studying the Aggregate Supply (AS) Curve it can be identified that initially it is nearly flat and is then followed by a sharp vertical turn.

The flat curve is an indication of the absence of inflation in that period whereas in the latter portion of the curve the case is vice-versa. The