Economic growth is the expansion of the total amount of goods and services available in a country. A healthy growth rate can reduce poverty, raise living standards and increase personal wealth for people in the country. Economic growth can be measured in terms of gross domestic product (GDP), inflation, and real GDP per capita.
An economy’s potential for growth can be influenced by national leadership, policies, natural resources, international economic relations and infrastructure. In addition, economic globalization can promote or depress actual growth depending on the countries involved.
There are three ways to generate economic growth: by adding capital, labor or technology. Increasing the quantity of available capital can accelerate economic growth, but this can have limits since the capital must be repaid. Similarly, increasing the quantity of labor can boost growth but may also lead to lower living standards. Technological advances can be a source of sustainable long-run growth. They make more use of existing resources and increase the output per unit input, such as the computer that allows you to file your tax return in minutes rather than hours.
The growth of an economy can be measured by the rate of GDP and other indicators such as employment, industrial production and exports. When the economy reaches a peak, a slowdown in the rate of GDP can follow, which is known as a recession. Countries can try to boost their actual growth by taking short-term measures such as monetary and fiscal policies or by focusing on boosting education and R&D.