Economic growth is a positive development that usually leads to higher income per person within the economy. This can make people better off and enable them to buy more things that they want or need. Growth also boosts economic output by increasing the amount of available resources and reducing the cost of producing those resources. This kind of growth is called intensive growth, and it can be caused by increasing the availability of capital or labor (such as through more investment in plants, equipment, and workers) or by reducing the cost of production with technological improvements.
Typically, long-term economic growth is the result of improving technology and increasing the productivity of labor. This can occur through building more facilities, making new tools, or finding better recipes for using the existing ones. It can also happen by expanding the pool of resources that are available to produce goods and services, such as by increasing the number of available raw materials or developing new technologies to extract them.
There are limits to how much growth is produced by accumulating more capital or labor, though. For example, the more resources there are to use, the more mouths people need to feed, so accumulating more capital and labor can only increase GDP so much.
Another way to measure growth is by adding up all the goods and services that are produced over a certain period, which is known as gross domestic product (GDP). This figure doesn’t account for things like food eaten or clothing worn. It can also be distorted by inflation. This is why economists often adjust it, a practice called adjusting for inflation.