Economic growth is a key factor in increasing living standards and quality of life for the people in an economy. It can be caused by many things including technological advances, an increase in the amount of capital invested in the economy (such as new buildings or better tools), and improved resource allocation and economies of scale. In general, economic growth occurs when an economy can produce more output with the same amount of labor and resources.
Economic output is the result of growing land, labor, and capital—things like seeds, food, minerals, and other natural resources that can be grown or mined, transformed into products, and provided as services. Counting these is one way to measure an economy’s economic output, but there are other measures that can give more insight into economic growth.
The most common measure is GDP (gross domestic product), which measures the market value of all goods and services produced within a country during a quarter or other period. To calculate this, economists make adjustments to account for inflation and population changes.
Short-term economic growth can be achieved in many ways, from building major infrastructure projects to lowering interest rates to encourage borrowing. But these types of stimulus are usually not sustainable and often lead to overproduction that can cause price inflation or overheating. Long-term economic growth is more commonly achieved by increasing the efficiency of the workforce or improving the productivity of an economy’s existing assets.