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Economic Growth Rate

Definition

Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.

What is an 'Economic Growth Rate'

An economic growth rate is a measure of economic growth from one period to another in percentage terms. This measure does not adjust for inflation; it is expressed in nominal terms. In practice, it is a measure of the rate of change that a nation's gross domestic product (GDP) goes through from one year to another, but gross national product (GNP) can also be used if a nation's economy depends heavily on foreign earnings.

Explaining 'Economic Growth Rate'

Causes of Economic Growth

Economic growth can be spurred by a variety of factors or occurrences. Most commonly, increases in aggregate demand encourage a corresponding increase in overall output that brings in a new source of income. Technological advancements and new product developments can exert positive influences on economic growth. Increases in demand, or availability, in foreign markets that result in higher exports can also have positive influences. This can be due to the spread of previously unavailable products into a new market or increases in the particular market’s economic standing that raise the discretionary income of its citizens. As demand rises, associated sales levels also rise. This influx of income causes an increase in the economic growth rate.

Aggregate Demand

In economics, aggregate demand includes the potential customers who are able and willing to buy a product. Aggregate demand increases can occur nationally or internationally. This change can spur an increase in production to create higher levels of supply, providing more product to reach potential customers. This increase in production and associated sales can lead to economic growth.


Further Reading


Financial repression and economic growth
www.sciencedirect.com [PDF]
… 12 N. Roubini and X. Sala-i-Martin, Financial repression and economic growth … view, all this means that economies more financially developed will be able to transform a given … function that is an increasing function of A, the degree of tinancial sophistication of the economy …

FDI and economic growth: the role of local financial marketsFDI and economic growth: the role of local financial markets
www.sciencedirect.com [PDF]
… 12 N. Roubini and X. Sala-i-Martin, Financial repression and economic growth … view, all this means that economies more financially developed will be able to transform a given … function that is an increasing function of A, the degree of tinancial sophistication of the economy …

The direction of causality between financial development and economic growthThe direction of causality between financial development and economic growth
www.sciencedirect.com [PDF]
… 12 N. Roubini and X. Sala-i-Martin, Financial repression and economic growth … view, all this means that economies more financially developed will be able to transform a given … function that is an increasing function of A, the degree of tinancial sophistication of the economy …

Economic growth and government expenditure: evidence from a new test specificationEconomic growth and government expenditure: evidence from a new test specification
www.tandfonline.com [PDF]
… 12 N. Roubini and X. Sala-i-Martin, Financial repression and economic growth … view, all this means that economies more financially developed will be able to transform a given … function that is an increasing function of A, the degree of tinancial sophistication of the economy …

International financial liberalization and economic growthInternational financial liberalization and economic growth
onlinelibrary.wiley.com [PDF]
… 12 N. Roubini and X. Sala-i-Martin, Financial repression and economic growth … view, all this means that economies more financially developed will be able to transform a given … function that is an increasing function of A, the degree of tinancial sophistication of the economy …

Financial development and economic growth: international evidenceFinancial development and economic growth: international evidence
www.journals.uchicago.edu [PDF]
… 12 N. Roubini and X. Sala-i-Martin, Financial repression and economic growth … view, all this means that economies more financially developed will be able to transform a given … function that is an increasing function of A, the degree of tinancial sophistication of the economy …

Foreign direct investment, financial development and economic growthForeign direct investment, financial development and economic growth
www.tandfonline.com [PDF]
… 12 N. Roubini and X. Sala-i-Martin, Financial repression and economic growth … view, all this means that economies more financially developed will be able to transform a given … function that is an increasing function of A, the degree of tinancial sophistication of the economy …

Financial development and economic growth: New evidence from panel dataFinancial development and economic growth: New evidence from panel data
www.sciencedirect.com [PDF]
… 12 N. Roubini and X. Sala-i-Martin, Financial repression and economic growth … view, all this means that economies more financially developed will be able to transform a given … function that is an increasing function of A, the degree of tinancial sophistication of the economy …

International financial integration and economic growthInternational financial integration and economic growth
www.sciencedirect.com [PDF]
… 12 N. Roubini and X. Sala-i-Martin, Financial repression and economic growth … view, all this means that economies more financially developed will be able to transform a given … function that is an increasing function of A, the degree of tinancial sophistication of the economy …



Q&A About Economic Growth Rate


What is economic growth rate?

An economic growth rate is a measure of economic growth from one period to another in percentage terms.

Is the economic growth rate adjusted for inflation?

The economic growth rate is expressed in nominal terms, not adjusted for inflation.

How can an increase in aggregate demand spur an increase in overall output?

This can occur when there are more potential customers who are able and willing to buy a product.

Can increases in supply lead to increased sales levels that cause an increase in the economic growth rate?

Yes, this can be due to increases in production or availability of products that reach new markets or higher levels of discretionary income among citizens.

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