Economic growth is the increase in production in a country or region over a certain period of time, usually measured through gross domestic product (GDP). It is considered a sign of a country’s overall health and can be measured by different means, such as job creation or property value. Recession occurs when a country has two quarters of GDP less than the previous quarter, and prolonged recession is called a depression. All factors working together help create an overall healthy economy.
Economic growth is the amount of production in a country or region over a certain period of time. While finance ministers may track these growth numbers each month, it’s typically the quarterly and annual numbers that attract the most attention. In addition to output, measured through gross domestic product (GDP), local governments and individuals may use a different standard to measure economic growth.
If a country’s GDP one year is $100 billion United States Dollars (USD) and the next year it is $125 billion, then there has been 25% economic growth. If, on the other hand, GDP was only $75 billion, growth would be -25%. In most cases, it is still referred to as growth, even if it is a contraction of the economy.
Most consider economic growth to be one of the surest signs of a country’s overall health. More trade means more jobs and more jobs mean more consumption, leading to more production. This can be a great circle to enter. Like most things, however, this growth tends to come and go in cycles.
If a country has two quarters of GDP less than the previous quarter, it is said to be in a recession. Historically, recessions tend to occur twice a decade, and some are more severe than others. Prolonged recession is called a depression, although the definition of a depression has never been set by economists. Suffice it to say that the economic numbers are generally negative for many quarters.
For some jurisdictions, economic growth is better measured by other means, although these are usually local anomalies. For example, a city that receives most of its money through property taxes may consider it growth if property values rise. They can infer why property values have gone up, people are getting better. If they’re making improvements, growth is on the way. This may or may not be an accurate assumption.
The general public may be tempted to measure economic change through job creation numbers. This is especially important for the general public, who are often not interested in production numbers. If jobs are created, that means wealth is being created and spread. This could be, perhaps, one of the best measures of economic growth. If no jobs are created or lost, this generally leads to a depressed economic state, especially for those affected and perhaps for the region at large.
Economic growth means different things to different people. While economists, governments, and individuals may all have their own views on what that should make up, the truth is, all of these things working together help create an overall healthy economy. Without one piece, the whole puzzle could fall apart.
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