Economic growth is an increase in the amount of goods and services a country produces over a period of time. This growth can come from expanding the economy’s workforce, improving labor productivity, or increasing per capita income by a faster rate. Alternatively, it can also come from increasing raw materials availability or the ability to transform those resources into more valuable goods and services.
Growth in an economy is usually measured by gross domestic product (GDP). GDP includes market value of all goods and services produced in a nation. This includes labor, materials, capital equipment, and entrepreneurship. GDP can be adjusted for inflation to make sure that it is measuring real economic growth rather than simply an increase in prices.
The fastest way to boost GDP is by adding more workers. However, this is not a sustainable source of growth. In fact, it can be quite dangerous to a nation’s financial stability. To avoid overheating, a nation must carefully manage its labor force growth and focus on labor productivity growth.
This can be accomplished through technological innovation. Things like the internet, electricity, and automobiles have improved productivity by making it possible to produce more output with the same workforce. Other measures of labor productivity include intellectual property, human capital, and material production.
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