Economic growth refers to the overall increase in value of everything a country makes from one year to the next. This macroeconomic statistic is measured by the market value of all goods and services produced within a nation’s borders and is known as gross domestic product (GDP). This measure is important for two reasons. First, it is more meaningful than counting up all the things that are made – for example, going from making a million airplanes to ten million pencils wouldn’t tell us much about whether or not a country’s economy has grown. Second, it provides a way to compare the relative economic performance of different nations in terms of their ability to produce wealth.
There are many sources of economic growth, but the main ones are population, investment, and productivity. A growing population leads to more economic output, because more people are working and spending money. Economic growth can also be fueled by more investment, as when individuals or businesses buy new capital equipment. This increases production by combining existing resources in novel ways to create more output.
A third source of economic growth is increased labor productivity, which happens when workers become more efficient at producing a given amount of goods and services. An obvious example is the invention of the printing press, which increased productivity by allowing a single worker to produce more books than he could have with his own hands and a quill.
Increasing economic growth is challenging, because it requires a combination of factors like greater immigration to offset an aging workforce and stronger competition rules that encourage innovation by smaller, faster-growing enterprises. However, small differences in growth rates can make a big difference in the lives of people around the world.