Economic growth is the increase in the size of a nation’s economy. More specifically, it is an increase in the rate of real gross domestic product (GDP) per capita, which measures the overall amount of money that a nation’s people are earning and spending each year. Economic growth is important to economists and other professionals who study the economy, but it is also an essential concept for politicians, business leaders, and ordinary citizens to understand. When an economy is growing, it means that businesses and people are earning more and spending more, and generally feeling better off than they would if the economy was stagnant or even declining.
One of the most important factors in economic growth is technology advancement. For example, computers that are more powerful than earlier models will enable workers to do the same job with less labor and produce more output. This type of innovation is called productivity improvement. Economies of scale and improved resource allocation are also important drivers of economic growth. These factors occur when the size of markets and the number of firms that serve them grows, and when labor is able to flow to where it is most productive.
Although many countries have experienced unprecedented levels of economic growth in recent decades, the world is currently experiencing a slowdown in global economic growth. In order to regain momentum, richer lead economies must increase their growth rates and poorer follower economies must improve their productivity.