Economic Growth Rate

Definition

Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.

Economic Growth Rate

What is an ‘Economic Growth Rate’

An economic growth rate is a measure of economic growth from one period to another in percentage terms. This measure does not adjust for inflation; it is expressed in nominal terms. In practice, it is a measure of the rate of change that a nation’s gross domestic product (GDP) goes through from one year to another, but gross national product (GNP) can also be used if a nation’s economy depends heavily on foreign earnings.

Explaining ‘Economic Growth Rate’

Causes of Economic Growth

Economic growth can be spurred by a variety of factors or occurrences. Most commonly, increases in aggregate demand encourage a corresponding increase in overall output that brings in a new source of income. Technological advancements and new product developments can exert positive influences on economic growth. Increases in demand, or availability, in foreign markets that result in higher exports can also have positive influences. This can be due to the spread of previously unavailable products into a new market or increases in the particular market’s economic standing that raise the discretionary income of its citizens. As demand rises, associated sales levels also rise. This influx of income causes an increase in the economic growth rate.

Aggregate Demand

In economics, aggregate demand includes the potential customers who are able and willing to buy a product. Aggregate demand increases can occur nationally or internationally. This change can spur an increase in production to create higher levels of supply, providing more product to reach potential customers. This increase in production and associated sales can lead to economic growth.

Economic Growth Rate

Definition