How is economic growth measured? Watch

When talking about economic growth for Unit 4 they are also referring to potential economic growth. This is effectively what the economy can produce, not just the amount of goods and services produced (this includes consumers good/services economic growth focuses more on capital goods).

Hence trade plays an important part because exports allow a country to accumulate foreign exchange reserves which then allow it to import capital goods from abroad. This allows economic growth because now the country has a greater stock of capital which allows it to produce more goods and services which it can consume to increase its standard of living or export to promote further economic growth. Ergo, a trade deficit isn't a bad thing if a country is importing capital goods which will allow it to export (and run a trade surplus) in the future.

Investment is useful for the same reason; domestic firms won't always have the knowledge and resources (particularly in developing countries) to expand. Therefore inward FDI (foreign direct investment) can benefit the economy because it gives it knowledge, resources and tax revenue.

Hope these ideas help.
Let me know if you need some more!

Rhys
www.learneconomicsonline.com