Economic growth: basics

In short: Economic growth describes the increase in a country’s economic output over time, usually measured by GDP. It is often seen as an indicator of rising prosperity, but is controversial as a sole measure.

In more detail: Growth can come from more labour, more capital, or higher productivity.

In detail

• Real vs. nominal growth: Real growth accounts for inflation, nominal growth does not.
• Productivity gains: Technological progress and efficiency gains are the most important long-term drivers of growth.
• Potential growth: Describes how strongly an economy could grow without overheating or inflation.
• Growth and prosperity: More GDP does not automatically mean more quality of life or fairer distribution.
• Limits of growth: Resource consumption and environmental strain limit unlimited growth in the long run.
• Alternative indicators: The Human Development Index or happiness indices try to measure prosperity more broadly.
• Business cycles: Growth does not proceed evenly but in phases of expansion and contraction (bruttoinlandsprodukt-bip, konjunktur-und-arbeitslosigkeit).