Long-term and Short-term Economic Growth

Long-term economic growth requires an increase in the long runaggregate supply and aggregate demand. The key concept in long-termeconomic growth is the long run nature of the determinant factors(Martin &amp Rodgers, 2000). On the other hand, short-term economicgrowth reflects an increase in the real GDP of a country over a shortduration due to a sudden upsurge in aggregate demand and aggregatesupply. An example is the discovery of non-renewable mineral depositsthat will increase the supply side of a country’s economy for ashort period.

Determinants of long-term economic growth include capital investment,increased working population, and increased labor productivity.Capital investment refers to government spending on developmentprojects such as roads and communication networks (Doppelhofer&ampMiller, 2004). The infrastructure will keep contributing to theeconomy for many years to come. A growing working population impliesthat there will be more labor to work on increasing the aggregatesupply of a country. In addition, home- grown labor is cheap incomparison to imported labor. Developing a country’s labor forcewill work to increase economic growth in the long term. When thelabor force is adequately trained, its productivity increases in thelong term.

Long-term economic growth will lead to improved living standardsbecause of the numerous opportunities that come with it. Higherrevenue for the government will enable it to implement measures aimedat eradicating poverty (Angelica et al, 2015). The determinants ofLong-term economic growth will also have a positive impact onbusinesses and the living standards in general. Increased capitalspending will be good for business because the government will engagethe local businesses in the acquisition of raw materials. Anincreased labor force translates to a bigger market for goods andservices.


Angelini, P., Clerc, L., Cúrdia, V., Gambacorta, L., Gerali, A.,Locarno, A., …&ampVlček, J. (2015). Basel III: Long‐termImpact on Economic Performance and Fluctuations. The ManchesterSchool, 83(2), 217-251.

Doppelhofer, G., &amp Miller, R. I. (2004). Determinants oflong-term growth: A Bayesian averaging of classical estimates (BACE)approach. The American Economic Review, 94(4), 813-835.

Martin, P., &amp Rogers, C. A. (2000). Long-term growth andshort-term economic instability. European Economic Review,44(2), 359-381.