Economic growth means that a country produces more goods and services in total than in a previous period. It is a sign that the economy is becoming larger. Economic growth is usually measured using gross domestic product, also known as GDP. means that a country produces more goods and services in total than in a previous period. It is a sign that the economy is becoming larger. Economic growth is usually measured using gross domestic product, also known as GDP.
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Economic growth shows whether an economy is expanding or contracting.
When companies produce more and consumers spend more, GDP increases. This can result from higher employment, technological progress or increased investment. Economic growth often leads to higher incomes and more jobs. At the same time, growth that is too rapid can lead to inflation, while prolonged contraction can lead to a recession. Governments and central banks aim to keep economic growth stable and sustainable.
Short example:
Suppose a country produced €500 billion worth of goods and services last year. This year, that amount is €525 billion.
The difference is €25 billion. €25 billion divided by €500 billion is 5%. The economy has then grown by 5%.
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