Definition Of Economic Growth
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Economic Growth Definition
Economic growth is defined as an increase in the production of goods and services in a country. Because economic growth measures the value of the goods being produced, rather than just the quantity, metrics like Gross Domestic Product (GDP) are often used. Usually, increases in aggregate production correlate with increased marginal productivity from each resident, leading to increased average incomes, greater consumer spending, and an improved standard of living.
What Is Economic Growth?
There are four primary methods of increasing production in an economy.
- Improving “human capital,” or the level of skill and specialization of workers.
- Improvements in technology, leading to greater efficiencies.
- Increasing the quantity and quality of tools and resources available, known as “capital goods” or “physical capital.”
- Increasing the overall size of the workforce.
- While total output may increase, increasing the population can have the opposite effect on residents’ standard of living.
Examples of Economic Growth
The Industrial Revolution is an historically significant example of enhancements of all 4 variables for production, all these components being what contributes to economic growth. Automated assembly in factories shifted workers into more skilled and specialized roles, further enhancing technology. Skilled labor and enhanced technology in turn increased the capital goods available, resulting in greater production, and ended periodic famines, leading to increased populations.