Demand, supply and growth slowdowns

There is an ongoing debate about whether the current slowdown reflects a demand- or supply-constrained economy. Analytically, this question is pertinent when a slowdown is cyclical. If aggregate demand is less than potential output, then the economy is demand-constrained. But if actual output is less than potential output, despite the existence of aggregate demand, then it can be termed a supply-constrained slowdown. Structural slowdowns are more complicated. In the case of a developing country such slowdowns are attributable to specific factors (lack of infrastructure, over-regulation, .....

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