Economic growth, as measured by a country’s gross domestic product (GDP), is the sum of all spending by consumers, businesses, and governments in one period. This includes consumption, investment, government spending, and net exports. It does not include the growth in a country’s population, which is a different statistic called “population growth”.
The goal of economic growth is to increase the quantity and quality of goods and services produced by a nation. There are a number of ways to accomplish this. One way is to increase the physical capital of a nation through investments in factories and infrastructure. Another is to increase the human capital of a nation through education, training, and skills acquisition. Another method is to improve the productivity of laborers through technological advances. This can be achieved through better tools, new recipes that make the most of capital and raw materials, or simply more practice by workers who already have those tools.
Economic growth is important because it lessens the burden of scarcity by allowing us to meet our consumption needs with less effort. It also allows us to make progress toward our economic and social goals, such as reducing poverty or raising living standards. While there is much to be proud of in today’s global economy, there are still many challenges facing the world’s poorest countries. Our future prospects are constrained by higher-for-longer interest rates, debt sustainability risks, and continuing climate shocks that threaten decades of development gains.
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