Economic growth

Economic growth refers to the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or GDP.

Overview

Economic growth is primarily driven by improvements in productivity, which involves producing more goods and services with the same inputs of labor, capital, energy and materials. Economists hold differing views on the ability of an economy to maintain a steady growth rate over the long term, and they have offered a variety of theories about how economic growth can be achieved and maintained.

Factors Influencing Economic Growth

Several factors can influence economic growth, including:

• Capital Accumulation: This involves the increase in physical goods, such as factories and machinery, that can be used to produce other goods and services.

• Technological Progress: This refers to the development of new methods and tools for producing goods and services. Technological progress can increase productivity by allowing more output with the same amount of inputs.

• Human Capital: This refers to the skills, knowledge, and experience of the workforce. A more educated and skilled workforce can produce more and better goods and services.

• Institutional Factors: These include the legal and administrative framework within which firms and workers operate. Good institutions, such as a legal system that enforces contracts, can promote economic growth by reducing uncertainty and promoting investment.

Economic Growth and Development

Economic growth is a necessary but not sufficient condition for economic development, which is a broader concept that includes not just the increase in output, but also improvements in the well-being of citizens, such as increases in life expectancy, education, and standards of living.

See Also

• Gross Domestic Product
• Capital Accumulation
• Technological Progress
• Human Capital
• Institutional Factors

References

Economic growth Resources
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