4.4.2—Measuring growth

Economic growth is a sustained rise in an economy’s real output. The usual rate is the percentage change in real GDP, because nominal GDP can rise only because prices rose.

Real GDP per capita is a better first indicator of the change in average material output: divide real GDP by population before comparing countries or years. It is still an average, not a complete measure of welfare.

If real GDP rises from 1,000 to 1,040, growth is 4%. If population rises from 100 to 104, real GDP per person is unchanged, so the headline growth rate overstates the typical output gain.

A positive GDP growth rate does not prove living standards rose for every household; distribution, unpaid work, quality and environmental costs may move differently.