Cambridge International as and a level Economics Ebook

Equilibrium and eff iciency: 
Closing output gaps 
increases the eff iciency with which resources are being 
used. This will lead to progress either in the form of higher 
output if a negative output gap is closed or a reduction in 
inflationary pressure and a more sustainable output in the 
case of a positive output gap.
KEY CONCEPT LINK
The factors contributing to 
economic growth
As noted above, in the short run if there is spare 
capacity, output can be increased as a result of an increase 
in aggregate demand. For instance, greater consumer 
confi dence may lead to higher consumer expenditure 
and so an increase in aggregate demand. Similarly, 
expansionary fi scal policy measures may result in more 
factors of production being employed and output rising.
In order to achieve economic growth that can be 
sustained over time, it is necessary for potential output 
and so long-run aggregate supply to increase. Th
ere are 
two broad causes of such an increase, which are more 
resources or better quality resources.
Increase in the quantity of resources
The supply of labour and entrepreneurs could be 
increased, after a period of time, as a result of a 
natural increase in population. More immediately, 
net immigration of people of working age would 
be likely to lead to a greater availability of workers 
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Cambridge International A Level Economics

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Scarcity and choice: 
The choice between producing 
extra capital goods and fewer consumer goods or 
producing the same quantity of both types of goods arises 
because of scarcity.
KEY CONCEPTS LINK
TOP TIP
Remember the performance of an economy and which 
economies are considered to be developed, developing 
and emerging will alter in the future.