What is the difference between actual growth and potential growth in economics?

What is the difference between actual growth and potential growth in economics Introduction: The Dual Aspects of Economic Growth Hello, everyone! Economic growth is a multifaceted concept, and it's important to recognize that it can be viewed from two distinct angles: actual growth and potential growth. While both are vital measures, they provide different insights into an economy's health and trajectory. Actual Growth: The Present Reality Actual growth, as the name suggests, refers to the real, tangible expansion of an economy in a given period. It is typically measured in terms of the Gross Domestic Product (GDP) or the total value of goods and services produced. Actual growth is influenced by various factors, including consumer spending, government expenditure, and exports. It serves as a reflection of the current economic conditions and is often used to gauge short-term performance. Potential Growth: The Future Possibilities In contrast, potential growth is a forward-looking concept. It represents the maximum rate at which an economy can expand over an extended period without triggering inflationary pressures. Potential growth is determined by factors such as labor force growth, technological advancements, and capital accumulation. While it may not be immediately achievable, it sets the stage for long-term economic planning and policy formulation. The Significance of the Distinction