Economic growth refers to a sustained rise in the production of goods and services. It is a result of a number of factors, including increased savings and investments, improved labor productivity, technological advances, and better access to healthcare and education.
A country’s population growth and the quality of its workforce are both important factors in determining how fast an economy grows. A growing population means more workers, which leads to higher outputs of goods and services. However, it is important that these additional workers be productive enough to consume the economic output they produce. Otherwise, the economy will run into trouble, and a recession may occur.
Another factor in economic growth is innovation, which leads to increased output per worker. This can be a major breakthrough, such as the creation of the automobile, or smaller improvements that add up over time, such as washing machines and chainsaws. Technology also drives economic growth by allowing factories to produce more output with the same amount of capital and labor. For example, a computerized tax filing system produces more output than an old paper form and saves a great deal of human labor.
A country’s economic growth is measured in terms of its gross domestic product (GDP), which includes all the money that consumers, businesses, and government spend in a given period. A country with high GDP typically has a healthy banking sector, good infrastructure, and high productivity.
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