Economic growth is about the increase in the total quantity and quality of all goods and services produced by a society over time. It is an important measure of economic health because it reflects the number and variety of things that people are able to buy for themselves and each other.
Growth is usually measured as the rate of change in GDP, which represents the current market value of all goods and services produced within a country’s borders in a given period. A healthy economy typically has a strong rate of growth. It is also possible to have a high rate of “catch-up” growth, which can occur following a recession as the economy quickly adjusts back to normal by hiring unemployed workers and more fully using the productive capacity that was idled during the downturn.
The greatest contribution to economic growth is usually the increase in productivity, which enables people to obtain more of the goods and services they want with fewer resources. This can be achieved by investing in physical capital goods, such as better and more machines, or through human capital investments such as education and training.
Other important contributors to long-term growth include ideas that make better use of existing assets (increasing output per input). These types of innovations are what makes computers possible – for example, they allow you to file your taxes faster and easier than by hand. They are also what makes it possible to listen to a podcast or play a game while riding on the train, rather than hunched over a paperback and a pen.