Economic growth means increasing the value of goods and services produced within a country. This usually leads to an increase in incomes for people in that economy, inspiring them to spend more, and driving a higher material quality of life and standard of living. How and why some economies grow faster than others is one of the most important questions in economics.
There are many ways to generate economic growth. One way is to build up physical capital, such as buildings or equipment. Another way is to invest in human capital, such as training or education. Yet another way is to use technology to improve productivity. For example, computers can help workers perform tasks more efficiently.
Most economists measure economic growth using the Gross Domestic Product (GDP) statistic. This takes into account both the total value of production and the price changes over time. The latter is referred to as real GDP because it is adjusted for inflation. This makes it easier to see when there has been genuine production growth rather than simply an overall increase in prices.
Economic growth has to be measured carefully. For example, taking away shovels from people who are digging a trench does not constitute an increase in economic output. The fact that some tools are more valuable to people than others also doesn’t constitute economic growth.
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