Economic growth is the increase in the total amount of goods and services produced by a nation or region over time. It is typically measured by a country’s gross domestic product (GDP). Economic growth is also known as economic expansion or sustainable economic development.
A country’s GDP is calculated by adding up the value of all consumer spending, business investment, government spending, and net exports in a given period. It is the most commonly used measure of economic growth.
The most important factor driving economic growth is increasing productivity, meaning that a person or business can produce more with the same resources (e.g., a fisherman with a bigger and better fishing rod can catch more fish than the same fisherman with the old rod). A key to improving productivity is increasing investment in human capital by promoting education and training. Investing in STEM students or subsidizing coding academies is one way to achieve this goal.
Another factor driving economic growth is improved technology, which allows people to produce more with the same resource by using new tools or combining existing ones in novel ways. For example, the invention of gasoline fuel significantly increased the productive potential of cars.
Economic growth is also beneficial for reducing poverty by enabling more people to earn incomes that enable them to afford basic necessities and to provide for themselves. However, economic growth is often criticized for causing environmental problems such as pollution and global warming.