Economic growth

Economic growth has two meanings: 1. Firstly, and most commonly, growth is defined as an increase in the output that an economy produces over a period of time, the minimum being two consecutive quarters. 2. The second meaning of economic growth is an increase in what an economy can produce if it is using all its scarce resources. An increase in an economy’s productive potential can be shown by an outward shift in the economy’s production possibility frontier (PPF).
The simplest way to show economic growth is to bundle all goods into two basic categories, consumer and capital goods. An outward shift of a PPF means that an economy has increased its capacity to produce.

What creates growth?
When using a PPF, growth is defined as an increase in potential output over time, and illustrated by an outward shift in the curve. An outward shift of a PPF means that an economy has increased its capacity to produce all goods. This can occur when the economy undertakes some or all of the following:
Employs new technology
Investment in new technology increases potential output for all goods and services because new technology is inevitably more efficient than old technology. Widespread 'mechanisation' in the 18th and 19th centuries enabled the UK to generate vast quantities of output from relatively few resources, and become the world's first fully industrialised economy. In recent times, China's rapid growth rate owes much to the application of new technology to the manufacturing process.
An economy will not be able to grow if an insufficient amount of resources are allocated to capital goods. In fact, because capital depreciates some resources must be allocated to capital goods for an economy to remain at its current size, let alone for it to grow.
Employs a division of labour, allowing specialisation
A division of labour refers to how