Economic growth means that more goods and services are available to people. This is one of the most important concepts in macroeconomics, and it can be measured by many different metrics including GDP.
Generally, economic growth can be achieved by increasing the available factors of production: land and natural resources, labor, capital equipment, and entrepreneurship. However, it can also be accomplished by improving the productivity of existing factors. For example, adding more chickens to a coop will increase the number of eggs produced by that coop. Similarly, a better way to make use of a resource—such as a new computer that allows workers to file taxes more efficiently—will lead to increased output.
To measure economic growth, economists look at the rate of real gross domestic product (GDP)—the total market value of all final goods and services produced by a country in a given period. This number is usually adjusted for inflation to make sure it includes all goods and services, not just those that are currently in high demand.
Economic growth is important because it can lead to higher living standards for everyone, but it doesn’t always do so. For example, higher growth can result in congestion and pollution. It can also create a current account deficit, where the economy is spending more than it is bringing in through exports. This can cause a recession. Moreover, higher growth can mean that more money is available to invest, which can cause bubbles in the stock market and other asset markets.