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balanced
,
 
when all sectors of the economy expand together, or 
unbalanced
. 
Less developed countries in particular find it difficult to achieve economic growth, because many of the 
factors necessary for growth are absent in these countries. 
Actual economic growth 
is the annual percentage increase in national output, which typically fluctuates 
in accordance with the trade cycle. 
Potential economic growth 
is the rate at which the economy would 
grow if all resources (eg people and machinery) were utilised. 
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PART A: THE BUSINESS ORGANISATION, ITS STAKEHOLDERS AND THE EXTERNAL ENVIRONMENT 
 
70
 
7.2 Actual growth 
Actual 
growth in the long run is determined by two factors. 

The growth in 
potential output 
(in other words the aggregate supply) 

The growth in 
aggregate demand (AD)
These factors should move in step with one another as we explained in Section 2.2 and Figure 3. 
7.3 Potential growth 
The causes of growth in 
potential 
output are the determinants of the capacity of the economy (the 
supply side) rather than actual spending (the demand side), and are as follows. 
(a) 
There may be increases in the 
amount of resources
available. 
(i)
 
Land and raw materials
. Land is virtually in fixed supply, but new natural resources are 
continually being discovered. 
(ii)
 Labour
(the size of the working population). The output per head will be affected by the 
proportion of the population which is non-working. 
(iii)
 Capital 
(eg machinery). 
(b) 
Increases in the