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Economic Growth

Definition

Economic growth refers to an increase in an economy's production capacity over time, resulting in higher levels of real GDP (gross domestic product). It is typically measured by the annual percentage change in real GDP.

Analogy

Imagine economic growth as a tree growing taller and stronger over time. Just like how a tree grows bigger and provides more shade, economic growth leads to increased production, improved living standards, and more opportunities for individuals.

Related terms

Productivity: The efficiency with which inputs (such as labor and capital) are used in the production process.

Investment: The purchase of new capital goods (e.g., machinery, equipment) or additions to inventories with the aim of increasing future production.

Human Capital: The knowledge, skills, education, and training possessed by individuals that contribute to their productivity.