Question

explain what you know about Economic growth and give examples.

Answer 1

Economic growth is the rate of increase in real GDP from one year to the next. It occurs when a nation's GDP rises over time; it is a long-term trend as opposed to short-term fluctuations in economic output. It is generally measured as the growth rate of real GDP from one year (t) to the next (t+1).

For example, if the real GDP in the United States increased from $33 billion in 1998 to $34.5 billion in 1999, then it increased by $1.5 billion.

Then the rate at which real GDP grew would be ($1.5/$33)*100=4.5%

It is important to use real GDP to measure economic growth because real GDP shows that the actual output, goods or services produced within a given time frame by a business or country, has risen.

A positive economic growth rate means that a country had an increase in its real GDP, while a negative growth rate means that output fell. Since 1930 the economic growth rate for the United States has averaged 3.3% per year, but the rate itself has varied dramatically, from to a low of –12.9% in 1932 (during the Great Depression) to a maximum of 18.9% in 1942 (during the height of World War II). Since the Postwar period, the economic growth rate for the United States has become more stable, relatively speaking. There have been no large spikes or dips in the growth rate because there have been no wars or economic crises of the same scale, and the development of new industries and increased worker productivity have led to consistent growth.