4.4.1—Economic growth

Economic growth is an increase in an economy’s real output or productive capacity over time. It is commonly measured by the percentage change in real GDP, with population growth considered when judging output per person.

Distinguish short-run recovery toward existing capacity from long-run growth that shifts productive potential. Growth can raise material living standards but may have distributional and environmental costs.

If real GDP rises from 1,000 to 1,030, growth is 3%; if population also rises 3%, real GDP per capita may be unchanged.

Nominal GDP growth can reflect price rises rather than more output, and aggregate growth does not prove every household is better off.