Potential growth is the sustainable, long-run increase in an economy’s maximum output capacity, driven by improvements in the quantity or quality of factors of production, such as labour, capital, land, and technology.

• It is depicted by a rightward shift in the long-run aggregate supply (LRAS) curve and the production possibility curve (PPC).
• Unlike actual growth, which refers to changes in real GDP, potential growth reflects an expansion of the economy’s underlying productive potential, independent of short-term output fluctuations.