Economic growth
Economic growth
- Economic growth is a rise in real GDP.
- GDP = total value of goods/services made in a year; real = after removing rising prices (the true change).
- Growth comes from more/better factors: investment, a bigger or more skilled workforce, new technology.
Practice
Economic growth is measured as a rise in:
Growth is a rise in real GDP — total output after removing the effect of rising prices.
The business cycle
- Real GDP moves through boom → recession → slump → recovery.
- (A recession is often falling real GDP for six months.)
- Good effects of growth: higher incomes, more jobs, better living standards, more tax. Bad: inflation, a wider rich–poor gap, pollution.
Practice
Order the stages of the business cycle.
Real GDP moves boom → recession → slump → recovery around its rising trend.
Practice
A possible bad effect of fast growth is:
Fast growth can cause inflation, a wider rich–poor gap, and pollution, even as incomes and jobs rise.
You've got it
Key idea
- economic growth = rising real GDP (real = inflation removed)
- the business cycle: boom → recession → slump → recovery
- growth lifts incomes/jobs but can bring inflation, inequality, pollution