Economic growth is an increase in the total quantity of goods and services produced by an economy. It is measured by a country’s gross domestic product (or GDP). This is the sum of all consumer spending, business investment, and government spending in a given period.
There are many ways that an economy can grow. One way is by adding physical capital goods. Another way is to add human capital. Laborers can become more accomplished at their jobs, raising productivity through training, practice, and skills development. Savings and investments are other forms of capital that contribute to economic growth.
Economic expansion can also occur as a result of technological progress. Newer, better tools allow workers to produce more output with the same amount of input. For example, a fisherman with a net can catch more fish in a shorter period than a fisherman using a rod.
Another way to measure economic growth is by looking at a country’s per-capita income. This measures a person’s level of wealth, or how much money they have available to buy goods and services. In developed countries, economic growth has lifted billions of people out of poverty. In less-developed countries, economic growth is the only way to lift people out of poverty.
Economic growth is important for everyone, but it’s especially critical in poorer countries. In the United States, it has led to higher living standards and more opportunities for individuals. In developing countries, it has reduced poverty and fueled social stability.