Economic growth is the increase in size of an economy over time. It is typically measured by gross domestic product (GDP), which includes all the goods and services produced in a country during a given period of time. Economic growth is important because it decreases the burden of scarcity and allows people to focus on more productive pursuits.
Many different things can contribute to economic growth, but it is usually an outgrowth of more inputs and improved production efficiency. More inputs can include more labor, more capital, or more raw materials. Improvements in production efficiency include technological advancement, increased human capital, more efficient resource allocation, and economies of scale.
The impact of even a relatively small difference in growth rates is magnified by compounding, meaning that over a long period of time, the output from a 4 percent growth rate will be twice as high as the output from a 3 percent growth rate. This is due to the rule of 72, which states that a certain level will double every 72 years.
While most economists agree that growth is desirable, not everyone is convinced that continued growth can be sustained. Among other issues, continued growth can lead to pollution, climate change, and depletion of natural resources. There are also concerns about the stress that high levels of growth can cause in some individuals. However, if economic growth can be achieved, it can bring benefits such as increased food production and improved health for humans and animals.
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