9.2.1—Actual vs potential growth

Actual economic growth is a rise in current real output. Potential growth is a rise in productive capacity or the sustainable level of output.

Actual growth can occur when firms use spare capacity and may reverse in a downturn. Potential growth usually requires more resources, better productivity or technology and can support higher output without the same inflation pressure.

A factory reopening idle machines creates actual growth toward capacity; new automation that raises the maximum sustainable output creates potential growth.

A temporary demand boom is not automatically long-run growth, and potential growth does not guarantee actual output rises if demand is weak.