Economic growth is an increase in the amount of goods and services produced by a country over a specific period of time. It is typically measured by a country’s gross domestic product (GDP).
In the past, many economists thought that economic growth could be achieved only through an increase in production technology. For example, in the 15th century, goldsmith Johannes Gutenberg created the printing press, which allowed a single worker to produce multiple books a day. This invention accelerated book production, thereby increasing the availability of books and therefore economic growth.
The long-run trend in an economy’s growth rate is determined by factors such as labor force growth, factor accumulation, and technological progress. However, actual growth rates can fluctuate significantly from one year to the next due to short-term factors such as business cycles, interest rates, and government policies.
Measuring growth is difficult because different people place varying values on certain goods and services. For example, a smartphone is worth more to an individual living in Alaska than it is to someone living in Florida. Moreover, even when the same value is assigned to each good or service, there are still differences in how much individuals want that good or service.
Some of the most important questions in the field of economics revolve around how to generate economic growth. For example, why do some countries experience high levels of growth that propel them into the ranks of the rich while others seem stuck in a middle-income trap?