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The long-run output growth trend an economy achieves is indicated by the path of trend Gross Domestic Profit (GDP) and is usually calculated as a percentage average annual output growth over a large number of years. This is because, given long enough, the phases of the business cycle averages out so that increases in the economy’s real GDP are largely due to the growth of productive capacity. The graph below shows the Actual GDP and the Trend GDP. From this graph it is clear that when the Actual GDP evens out to show the underlying Trend GDP, there is still an increase in the Real Gross Domestic Profit...
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