Understanding Economic Growth

Economic growth

An increase in the real output of goods and services produced in a country over time, measured by Real Gross Domestic Product (real GDP).

Real GDP

The value of output excluding the effect of changes in prices, used to measure economic growth.

Nominal GDP

The value of output including the effect of changes in prices.

Real GDP per capita

Real GDP divided by the population, providing a measure of economic output per person.

Production Possibility Frontier (PPF)

A graphical representation showing the maximum combination of goods and services that can be produced given available resources and technology.

Aggregate Production Function (APF)

A mathematical relationship showing how much output can be produced with a given amount of inputs.

Labour force growth rate

The rate at which the labour force of a country is increasing over time.

Labour productivity growth rate

The rate at which the productivity of labour, i.e., output per worker, is increasing over time.

GDP growth rate calculation

Percentage change in real GDP from one period to the next, calculated by ((GDP in later period - GDP in earlier period) / GDP in earlier period) x 100.

GDP % change formula

GDP % change = ((GDP in later period - GDP in earlier period) / GDP in earlier period) x 100.

GDP as a measure of economic welfare

While GDP measures economic activity, it does not account for non-market activities, quality improvements, well-being, or negative externalities.

Negative Externalities

Costly side effects of economic activity, like pollution.

GDP Data

Information on the economic output of a country.

Well-Being Metrics

Alternative measures to GDP for assessing prosperity.

Indicator Dashboard

Visual representation of key metrics for assessment.

Aggregate Production Frontier (APF)

Models the relationship between economic growth and resources.

Diminishing Returns

Output increases at a decreasing rate with additional inputs.

Labour Input

Quantity of workforce contributing to production.

Capital Deepening

Increasing capital per worker to enhance productivity.

Technological Progress

Advancements that promote economic growth and efficiency.

Determinants of Economic Growth

Factors influencing a country's potential economic growth.

Three Ps

Population, Participation, and Productivity as growth determinants.

Labour Productivity

Output per worker or per hour worked.

Population Growth Impact

Effects of population increase on demand and labor force.

Immigration Impact

Immediate growth effects due to working-age migrants.

Participation Rate

Percentage of working-age population in paid or seeking work.

Productivity Increase

Enhancing output from the same input quantity.

Capital deepening

Increasing the stock of capital equipment per worker, resulting in a higher capital-labor ratio.

Multifactor productivity

Improving labor skills and efficiency through factors such as education, training, infrastructure, and better management.

Human capital

Investment in education and training to enhance labor skills and efficiency.

Social overhead capital

Investment in more infrastructure like transport and communication networks to improve productivity.

Productivity

Main driver of potential economic growth in developed economies, enhancing the efficiency of all factors of production.

Population

One of the '3 Ps' contributing to real GDP growth, alongside participation and productivity.

Participation

One of the '3 Ps' contributing to real GDP growth, alongside population and productivity.

Unemployment rate

Percentage of the labor force that is unemployed and actively seeking employment.

Labor productivity

Output per hour worked, a key factor influencing economic growth and efficiency.

Income inequality

The unequal distribution of income among individuals or households within an economy.

Resource depletion

The exhaustion of natural resources due to economic growth, leading to future scarcity and price increases.

Sustainability

The ability to maintain economic growth without depleting resources or causing negative impacts for future generations.

Optimal rate of growth

The rate at which the benefits of economic growth are maximized while minimizing the associated costs.

GDP per hour worked

A measure of labor productivity, showing the economic output generated per hour of work.