The total market value of all final goods and services produced inside a country in a particular period is known as GDP, or Gross Domestic Product. Private and public consumption, private and public investment, and exports minus imports are all included.
GDP is the most widely used metric of economic activity and is an useful way to track a country’s economic health. The percent change in real GDP, which corrects the nominal GDP figure for inflation, is referred to as economic growth (GDP growth). As a result, real GDP is also known as inflation-adjusted GDP or GDP in constant prices.
For the last five years, the table below illustrates percent changes in real Gross Domestic Product (GDP) each country.
Are you looking for a forecast? The FocusEconomics Consensus Forecasts for each country cover over 30 macroeconomic indicators over a 5-year projection period, as well as quarterly forecasts for the most important economic variables. Find out more.
Is GDP growth the same as economic growth?
Economic growth is defined as an increase or improvement in the inflation-adjusted market value of an economy’s goods and services through time. Statisticians commonly use the percent rate of rise in real gross domestic product, or real GDP, to measure such growth.
To avoid the distorting influence of inflation on the prices of products produced, growth is normally assessed in real terms that is, inflation-adjusted terms. National income accounting is used to calculate economic growth. Economic growth is defined as the annual percent change in gross domestic product (GDP), and it includes all of the benefits and negatives associated with that metric. Countries’ economic growth rates are frequently compared using the GDP to population ratio (per-capita income).
The geometric yearly rate of growth in GDP between the first and last year during a period of time is referred to as the “rate of economic growth.” This growth rate indicates the average level of GDP throughout time, ignoring any volatility in GDP in the interim.
Intensive growth is defined by economists as an increase in economic growth caused by more efficient use of inputs (increased labor productivity, physical capital productivity, energy productivity, or material productivity). GDP growth driven only by increases in the number of inputs available for usage (for example, greater population or new territory) is referred to as extensive growth.
Economic growth is also fueled by the development of new goods and services. In the United States, almost 60% of consumer spending in 2013 was spent on items and services that did not exist in 1869.
Is GDP the same as the economy?
One of the most popular metrics used to track the health of a country’s economy is gross domestic product (GDP). The GDP of a country is calculated by taking into account a variety of different aspects of that country’s economy, such as consumption and investment.
What is the relationship between GDP and economic growth?
GDP is significant because it provides information on the size and performance of an economy. The pace of increase in real GDP is frequently used as a gauge of the economy’s overall health. An increase in real GDP is viewed as a sign that the economy is performing well in general.
What is the major distinction between economic development and economic growth?
The economy undergoes quantitative changes as a result of economic expansion. The growth of national or per capita income is reflected in economic growth. Economic development entails changes in income, savings, and investment, as well as gradual changes in the country’s socioeconomic structure (institutional and technological changes).
What is the state of the economy?
When comparing one period of time to the next, economic growth is defined as an increase in the production of economic commodities and services. It can be expressed in nominal or real (inflation-adjusted) terms.
Is GDP the same as GDP?
- The monetary worth of all finished goods and services produced inside a country during a certain period is known as the gross domestic product (GDP).
- GDP is a measure of a country’s economic health that is used to estimate its size and rate of growth.
- GDP can be computed in three different ways: expenditures, production, and income. To provide further information, it can be adjusted for inflation and population.
- Despite its shortcomings, GDP is an important tool for policymakers, investors, and corporations to use when making strategic decisions.
What is GDP such a poor indicator of economic growth?
GDP is a rough indicator of a society’s standard of living because it does not account for leisure, environmental quality, levels of health and education, activities undertaken outside the market, changes in income disparity, improvements in diversity, increases in technology, or the cost of living.
What are the four economic growth factors?
- The building blocks of an economy are the factors of production, which are the resources employed in generating and producing a good or service.
- Land, labor, capital, and entrepreneurship are the forces of production that are flawlessly linked to create economic progress.
- By cutting manufacturing costs and raising earnings, improved economic growth enhances the standard of living.
Definitions and Basics
When comparing one period of time to the next, economic growth is defined as a rise in an economy’s capacity to generate products and services. It can be expressed in nominal or real terms, with the latter factoring in inflation. Although alternative metrics are sometimes employed, aggregate economic growth is traditionally quantified in terms of gross national product (GNP) or gross domestic product (GDP).
Nobel Laureate Paul Romer discusses economic growth in the Concise Encyclopedia of Economics.
When people take resources and reorganize them in more productive ways, economic growth occurs. The kitchen provides a useful metaphor for economic production. We blend inexpensive ingredients together according to a recipe to make valuable final goods. The amount of cooking one can do is limited by the availability of ingredients, and most cooking in the economy has negative consequences. We would run out of raw materials and endure unacceptable levels of pollution and nuisance if economic progress could only be accomplished by doing more and more of the same kind of cooking. However, history reminds us that better recipes, not just more cooking, are the source of economic prosperity. In general, new recipes have fewer negative side effects and produce higher economic value per unit of raw material….
Kevin Grier’s article “Empirics of Economic Growth” is in the Concise Encyclopedia of Economics.
Why are certain countries wealthy while others are impoverished? Why do certain countries maintain high levels of growth, propelling them into the ranks of the wealthy, while others appear to stagnate indefinitely? These are, without a doubt, the most fascinating and crucial topics in economics….
Economists have been studying the factors that influence economic growth since the late 1980s. However, there are few results that are universally accepted as of yet. Because raising the growth rates of the world’s numerous poor countries is a fundamental global policy goal, the lack of consensus is problematic. We have at least two natural experiments in which a single nation was divided by quite different types of government: the two Germanys from the end of WWII until 1991, and the two Koreas….
Usually, investment is the outcome of a reduction in consumption. Early humans had to decide how much grain to consume after the harvest and how much to conserve for future planting in a completely agrarian society. The latter was a financial investment. We dedicate our productive capacity in a more contemporary society to creating pure consumer items like hamburgers and hot dogs, as well as investment goods like semiconductor foundries. Our gross national product will increase by one dollar if we produce one dollar worth of hamburgers today. If we build a $1-worth of semiconductor foundry today, our gross national product will increase by one dollar, but it will also increase the following year since the foundry will continue to generate computer chips long after the hamburger is no longer available. This is how economic growth is achieved through investment. Human progress would come to a halt without it….
In the News and Examples
Kevin Kelly discusses the future, productivity, and life quality. EconTalk is a podcast about economics.
Kevin Kelly discusses gauging productivity in the internet age with EconTalk host Russ Roberts, as well as recent predictions that the US economy has entered a prolonged period of stagnation. The discussion then shifts to robots’ ability to improve the quality of our daily lives.
Paul Romer on Growth, a podcast hosted by Paul Romer on EconTalk (subsequently awarded the Nobel Prize). 27th of August, 2007.
Paul Romer, a Stanford University professor and Hoover Institution Senior Fellow, discusses growth, China, innovation, and the value of human capital with EconTalk host Russ Roberts. Ideas in the creation of growth, the belief that ideas allow for increased returns, and intellectual property and how it should be treated are also examined. This 75-minute audio is an excellent introduction to thinking about what produces and sustains our modern-day way of living. …
NYU’s William Easterly discusses why some countries are able to escape poverty while others are unable to, why aid almost always fails to generate growth, and what can realistically be done to help the world’s poorest people….
Gregg Easterbrook discusses his new book, The Progress Paradox: How Life Gets Better While People Feel Worse, and the topics it contains. How has living in America changed in the last century? Is the typical individual gaining ground, or are the wealthy reaping all of the benefits? Easterbrook claims that the average American’s life is better in practically every way. The irony is that, despite these advantages, we don’t appear to be any happy….
Enrico Moretti of the University of California, Berkeley, and author of the New Geography of Jobs speaks with EconTalk host Russ Roberts about his book’s concepts. Moretti shows how the economic performance of cities and the employees who live there is influenced by their education. Moretti claims that educated workers have spillover effects in the city, resulting in more jobs and higher earnings. He uses the fortunes of Seattle and Albuquerque over the last three decades as an illustration of how little changes may effect economic development, and he contends that serendipity plays a significant part in selecting whether cities become high-tech innovation hubs. Moretti closes the discussion by arguing for increased investments in education and research and development.
Happiness, Inequality, and Envy, according to Richard Epstein. On November 3, 2008, EconTalk broadcasted a podcast.
Richard Epstein of the University of Chicago discusses the relationship between happiness and wealth, the impact of inequality on happiness, and the economics of jealousy and altruism with EconTalk presenter Russ Roberts. He also uses evolutionary theory to explain some of the findings of happiness research. …
Clive Crook’s contribution to the Concise Encyclopedia of Economics is Economic Development: Third World Economic Development.
Since the 1950s, the development experiences of Third World countries have been staggeringly diverseand thus extremely instructive. The developing countries looked a lot more alike forty years ago than they do now. Take, for example, India and South Korea. By any measure, both countries were impoverished: India’s per capita income was under $150 (in 1980 dollars), while South Korea’s was around $350….
Morten Jerven of Simon Fraser University, author of Poor Numbers, discusses the quality of data coming out of Africa on income, growth, and population with EconTalk presenter Russ Roberts. Many empirical assessments of African progress, according to Jerven, are useless due to inconsistencies in data and methodology across countries and within a country over time. The session concludes with a discussion of how to enhance data gathering in developing countries.
The generation of knowledge for application in products or processes is what research and development (R&D) is all about….
Harvard University economist Jeffrey Miron proposes three policy reforms that he believes would help the US economy recover and grow: lowering entitlements, freezing regulation, and replacing the current tax code with a consumption-based flat tax.
A Little History: Primary Sources and References
The Concise Encyclopedia of Economics has a section on the Industrial Revolution and the Standard of Living.
Between 1760 and 1860, technological advancements, education, and rising capital stocks transformed England into the world’s workshop. The transition, known as the industrial revolution, resulted in a continuous increase in real income per person in England and, as its impacts extended, the rest of the Western world….
From 1952 to 1971, real GNP growth averaged 9.6% after the conclusion of the Allied occupation of Japan. From 1972 to 1991, growth was steady but not as rapid, averaging 4% per year. The rest of the 1990s and the early 2000s were markedly different. Between 1991 and 2003, actual economic growth was only 1.2 percent per year on average. Why was Japan able to grow at such a rapid pace for such a long time, and why has the ensuing downturn lasted more than a decade? …
The German economy was in tatters after WWII. The war, combined with Hitler’s scorched-earth strategy, resulted in the destruction of 20% of all housing. Food production per capita in 1947 was just 51% of that in 1938, and the occupying countries’ official food rations ranged from 1,040 to 1,550 calories per day. In 1947, industrial output was only a third of what it had been in 1938. Furthermore, a huge proportion of Germany’s working-age men had died. Observers expected West Germany would have to be the largest beneficiary of the US welfare state at the time, but its economy was envied by the rest of the world twenty years later. And people were already talking about the German economic miracle less than ten years after the war….
Advanced Resources
Should Public Debt Be Retired? Debt Retirement and Economic Growth, in Should Public Debt Be Retired? James M. Buchanan’s Public Principles of Public Debt, Chapter 13
If economic growth is widely regarded as a desirable characteristic of a well-functioning economic system, public actions focused at boosting growth rates may appear to be prudent. The premise that the pace of growth produced by individual decisions within the institutional complex of social, economic, and political forces is less than a “desired” or “optimum” rate is implicit in every public intervention to boost growth….
Growth, Poverty, and Business Cycles, by Robert Lucas The fifth edition of the EconTalk podcast aired on February 5, 2007.
Nobel Laureate and University of Chicago professor of economics Bob Lucas discusses wealth and poverty, how living standards change around the world and over time, the reasons of business cycles, and the role of money in our economy. He discusses Jane Jacobs, immigration, and Milton Friedman’s influence on his work along the way. …
What is the difference between the two types of economic growth?
In economic theory, there are two types of economic growth: intensive and extensive; additionally, there is an innovative type of economic growth that is part of an intensive. Extensive expansion is defined by a quantitative increase in the usage of one or more production elements.