Question

Does the rate of actual economic growth have any effect on the rate of potential growth and why may one country experience a faster rate of growth than another?

word count is 1000 words

Answer 1

Note : Please feel free to adhere to the mentioned points and structure the essay.
While actual growth rate considers the increase in actual output, potential growth rate is an indicator of the speed at which an economy is projected to grow. In subtle terms, potential growth could be speculative given that a lot of things could go right or wrong and have a positive or negative effect on a country's growth. Potential growth also assumes that all resources for a country are being utilized efficiently. Whereas Actual growth indicates a rise in the GDP. Yes, the rate of actual economic growth would generally predict the rate of potential growth. If there's a difference between these two rates, then it would imply that the economy is not performing at its maximum effeciency : meaning there's a growth gap.
Access to resources differ from one country to another. This is a factor which affects productivity, and productivity directly affects economic growth. In general, we see that developing countries have a better scope for adapting to newer reforms and technologies wherein their economic growth is really high on papers, while developed countries generally stagnate after reaching a point of maxima on their growth curve. Another reason why different countries have different growth rates is because fiscal policies generally vary owing to governmental decisions of various countries.