Economic growth is an increase in the total amount of goods and services produced by a country. This is typically measured as an increase in gross domestic product (GDP). Increasing GDP enables societies to provide more of the things that people want and need, including food, clothing, housing, and health care. In addition, economic growth can help reduce poverty and inequality by bringing people out of poverty and raising living standards in underdeveloped or developing countries.
There are several different ways to generate economic growth. One way is to increase the quantity of labor inputs by adding new workers or improving existing workers’ output per hour. Another way is through technology, such as when goldsmith Johannes Gutenberg combined his idea of movable letters with the mechanical power from his wine press to create the printing press, enabling books to be produced much more quickly. This kind of technological progress often leads to long-term economic growth.
A third way to generate economic growth is by reallocating resources from less-productive uses to more productive ones. This might include moving land from agricultural to industrial use or redeploying natural resources.
Economic growth is also often viewed as an increase in the overall size of the “pie” in which everyone gets a bigger slice without redistributing the pie’s existing slices. However, many economists have cautioned that this view ignores the fact that the increased size of the pie may be artificially maintained only by consuming more borrowed funds or using other non-renewable resources.
