Definition
The increase in the amount of goods and services that are produced in an economy over a certain period of time. Economic growth can be measured in nominal or real terms using the respective GDP (Gross Domestic Product). Nominal GDP accounts for the effects of inflation, whereas they are excluded in the real GDP.
Example
When productivity in an economy increases, more goods and services can be produced and sold over the same period of time. As a result, the economy grows and overall wealth increases. Economic growth is necessary because people generally want more commodities and a higher standard of living. Furthermore it is easier to redistribute wealth and advance new technologies while an economy is growing.
Relevance
The principle of economic growth has become quite controversial in recent years. While many economists perceived the necessity of growth almost as a dogma, critics have become increasingly numerous. Since the global economies are continuously overexploiting natural and non-renewable resources, the idea of unlimited economic growth seems to be doomed to fail at this point. It is important to be aware that after all economic growth is a means to an end and not an end in itself.
Labels: Dictionary, Economic Growth