Economic growth occurs when a country’s economy, or the total amount of goods and services produced, grows larger over time. This is commonly measured by a country’s gross domestic product (GDP). Economic growth can be caused by many different things, including increasing the number of workers in an economy, finding new resources, or making better use of existing resources. For example, a computer that can do more work in less time than an older computer can be considered to have contributed to economic growth because it makes the original resources (labor and raw materials) go further.
The most straightforward way to generate economic growth is to increase the amount of labor in an economy, or what’s called human capital. This is possible because as people gain more skills, they are able to produce more goods and services. Economic growth can also occur when there’s more money in an economy, or what’s called financial capital. This is possible because more money translates into more opportunities for people to invest in goods and services, or to build businesses, or even to spend on consumption items like entertainment or cars.
The other major source of economic growth is technological progress, which happens when the people in an economy make better use of their available resources. This can happen by using newer and better tools to work with, or by developing recipes that allow people to combine different types of resources in novel ways that are more productive than previous combinations.
About the Author
