Economic Growth

Summary

Economic growth is an increase in the amount of goods and services produced per head of the population over a period of time. It is measured by the increase in the real value of goods and services produced in an economy over time.

• Economic Growth — an increase in the real value of goods and services produced in an economy over time.
  Example: A country producing more cars and electronics each year.
• National Output — the total value of output of goods and services produced in an economy.
  Example: Calculated using output, income, or expenditure.
• GDP (Gross Domestic Product) — the total market value of all final goods and services produced within an economy by its factors of production in a given period of time.
  Example: The GDP of a country includes all goods and services produced domestically.
• Nominal GDP — the value of output produced in an economy in a period of time, measured at current market values or prices.
  Example: GDP calculated without adjusting for inflation.
• Real GDP — the value of output produced in an economy in a period of time, measured assuming prices are unchanged over time.
  Example: GDP adjusted for inflation to reflect true output.
• GDP per head/capita — measures the average output/income per person in an economy.
  Example: Total GDP divided by the population size.

Exam Tips

Key Definitions to Remember

• Economic Growth
• National Output
• GDP (Gross Domestic Product)
• Nominal GDP
• Real GDP
• GDP per head/capita

Common Confusions

• Confusing nominal GDP with real GDP
• Misunderstanding the difference between potential and actual growth

Typical Exam Questions

• What is economic growth?
  Economic growth is an increase in the real value of goods and services produced in an economy over time.
• How is GDP per capita calculated?
  GDP per capita is calculated by dividing the total GDP by the population size.
• What are the consequences of economic growth?
  Consequences include increased employment opportunities, improved living standards, and potential environmental impacts.

What Examiners Usually Test

• Understanding of how economic growth is measured
• Ability to explain the causes and consequences of economic growth
• Knowledge of policies that promote economic growth