Economic growth is the rise in the production of goods and services during one period compared to the previous one. It’s an important indicator of a nation’s health and progress. How widely the fruits of growth are shared is also crucial to its sustainability.
The economy grows when people, businesses, and governments are earning more money, spending more, and generally feeling better off. This process is typically fueled by an increase in the production of goods and services, which is measured by the gross domestic product (GDP).
There are many ways to measure growth, but GDP is the most common. It combines consumer spending, business investment, government spending, and net exports to come up with a measure of the total amount of money spent in a country.
Growth is often defined as the rate at which the economy can expand without causing inflation. This is called the potential growth rate of an economy, and it’s influenced by labor force growth, capital accumulation, and technological advances. It can fluctuate due to demand-side factors such as consumer spending and government policies.
In an economic sense, growth is like growing the size of the pie so that everyone can have a larger slice. This removes the sting of scarcity, the condition that exists when there aren’t enough resources to meet everyone’s needs. As a result, scarcity forces individuals and society to make choices, and every choice involves giving up something else that could have been had at that moment.