Economic growth is the increase in the production of goods and services in a nation over time. It’s usually measured by the rise in a country’s Gross Domestic Product (GDP) or Gross National Product (GNP), adjusted for inflation.
There are several ways to generate economic growth. One way is to grow the labor force; more workers generate more economic goods and services. But increasing the workforce has some disadvantages. It increases the amount of output that must be consumed, so new workers must be at least as productive as those who are already working to avoid becoming net consumers and depressing economic activity.
Another way to grow an economy is through improved technology. This can increase productivity through increased efficiency, but it also increases the quantity of capital goods and raw materials needed to produce additional economic output. This type of economic growth is highly dependent on savings and investment because it requires research and development to make these technological improvements.
A final way to generate economic growth is through population growth. Increasing the number of people working in the workforce can increase GDP per capita, but it’s important to remember that population growth is not a panacea. Eventually, as the world’s population grows older and birthrates decline, the rate of economic growth must slow significantly for average GDP to remain the same.