Q:

What determines economic growth?

A:

Quick Answer

According to Economics Help, economic growth is caused by an increase in aggregate demand and supply. An increase in national output and national income also contributes to a country's economic growth.

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Full Answer

Changes in real gross domestic product measure economic growth. An increase in GDP over a particular period is an indication that the country is experiencing economic growth. On the contrary, a decrease in GDP over time indicates economic stagnation or decline. Measuring the trend rate of growth requires a long-run series of data perhaps of 20 years or more in order to calculate average growth rates from peak to peak.

According to Geoff Riley of Tutor2U.net, growth in the economy is driven by six independent factors, including growth in the physical capital stock, growth in the size of the active labor force, growth in the quality of labor, technological progress, macroeconomic stability, and rising demand for goods and services. Although sometimes used interchangeably, growth is not the same as development. Economic growth is used as means of supporting development within a country. Economic growth is also dependent on a country's access to natural reserves and the speed at which productivity develops as a consequence of a specified amount of capital investment.

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