Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What does actual economic growth refer to?

1. The yearly increase in national output

2. Theoretical models of economic performance

3. Long-term capacity of the economy

4. Overall productivity of resources at maximum usage

The correct answer is: The yearly increase in national output

Actual economic growth refers to the measurable increase in the value of goods and services produced by an economy over a specific period of time, typically one year. This is often represented by the increase in the Gross Domestic Product (GDP). The “yearly increase in national output” directly aligns with this definition, as it quantifies the real expansion of an economy's capabilities and production. In contrast, theoretical models of economic performance focus on frameworks and assumptions about how economies function rather than on actual output measures. The long-term capacity of the economy relates more to potential growth rather than actual growth, which is concerned with present output levels. Lastly, while overall productivity at maximum usage is an important concept in understanding efficiency and potential output, it does not capture the reality of economic growth, which is about the actual changes in output over time as measured by economic indicators.