Explain the difference between actual growth and potential growth.

Mark scheme

Marking points from the official mark scheme (May/June 2018). The mark or mark type is shown in brackets.

1. Actual growth is an increase in the volume of goods and services produced. Firms increase their output, while consumption, investment and exports are increasing.
2. Potential growth is an increase in the capacity of an economy to produce goods and services.
3. Reference to short run and long run and comment on link to production possibility or aggregate demand.
4. L4 (9-12 marks) For a sound explanation of both terms and a clear understanding of the differences.
5. L3 (7-8 marks) For an accurate explanation on one term and limited explanation of the other.
6. L2 (5-6 marks) For an accurate explanation of one term or a weak explanation of both terms.
7. L1 (1-4 marks) For an answer which has some basic correct facts but includes irrelevancies. Errors of theory or omissions of analysis will be substantial.
8. A discussion of the benefits of economic growth e.g. rising GDP, improving standard of living, better health, longer lifespans.
9. A discussion of the costs of economic growth e.g., pollution, congestion, increase in working hours.
10. L4 (9-13 marks) For a thorough discussion of both sides of the issue. Maximum11 if no conclusion.
11. L3 (7-8 marks) For a competent comment which does not fully analyse both sides. An analysis of one side and limited analysis of the other.
12. L2 (5-6 marks) For an accurate though undeveloped comment concentrating on one side.
13. L1 (1-4 marks) For an answer which shows some knowledge but does not indicate that the question has been fully grasped. The answer will have some correct facts but include irrelevancies. Errors of theory or omissions of analysis will be substantial.