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Which diagram should I draw to depict economic growth?? (AS macro )

Hi guys

How can i illustrate economic growth diagrammatically in my Macro essays? My teacher has said to draw a PPF & shift the curve outwards, is this so?

In that case, how should I label the axes?

Thanks in advance.
Reply 1
Avatar for 3121
3121
21
The PPF is one way, not the best way though. For a PPF you just label one side "Consumer Goods" and the other as "Capital Goods" then show a curve shifting out (make sure you include arrows)

I personally would show it using a shift in Long run aggregate supply or aggregate demand (where output increases not where it causes inflationary pressures)
(edited 7 years ago)
Reply 2
Avatar for sinatraa
sinatraa
2
PPF isn't a great way and you won't score all the marks for diagram and analysis. You should draw and AD and AS diagram and show a shift of either one depending on which one increased. And increasing in real output indicates economic growth.
Reply 3
Avatar for Demesne7
Demesne7
OP
15
Original post by zayn008
The PPF is one way, not the best way though. For a PPF you just label one side "Consumer Goods" and the other as "Capital Goods" then show a curve shifting out (make sure you include arrows)

I personally would show it using a shift in Long run aggregate supply or aggregate demand (where output increases not where it causes inflationary pressures)


Original post by sinatraa
PPF isn't a great way and you won't score all the marks for diagram and analysis. You should draw and AD and AS diagram and show a shift of either one depending on which one increased. And increasing in real output indicates economic growth.


Thanks guys, appreciate it. Should I use the classical or keynesian LRAS curve?
Reply 4
Avatar for sinatraa
sinatraa
2
Original post by Demesne7
Thanks guys, appreciate it. Should I use the classical or keynesian LRAS curve?


Doesn't matter, either are fine in most cases but again it depends on context
Reply 5
Avatar for 3121
3121
21
Original post by Demesne7
Thanks guys, appreciate it. Should I use the classical or keynesian LRAS curve?


I would personally stick to Keynesian because you can make more points, with classical a shift in AD is pure inflationary and doesn't demonstrate economic growth just inflationary pressure. Keynesian is the preferred and modern school of thought and much of the information you're taught is based on Keynesian, you only learn classical for reference / counter argument purpose and it can come up in section A otherwise don't use it In section B you kill many good points and sometimes won't be able to make the point like with AD
Reply 6
Avatar for Demesne7
Demesne7
OP
15
Got it. Thanks again guys! :smile:

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