Economic Growth is defined as the way that the real income of an economy increases over time. This generally signifies that the economy is wealthier and producing more, individuals are better off, and that living standards are higher.
A more technical definition would go into the way that Economic Growth is measured - usually in terms of the Gross Domestic Product - the sum total of the value of a countryâ€™s output over the course of a year. However GDP figures can be misleading - for example, a growing economy may have rising output levels but also may have a growing birth rate which negates any positive effect on the standards of living. Alternatively, figures that show clear growth in terms of wealth may be ignoring the fact that inflation rates are rising also, thereby negating the power of said growth.
Normally, Real Income as used when looking at Economic Growth takes the GDP figures and then takes out the effect of inflation rates (by forming an index) thereby creating a reasonable set of statistics from which to draw conclusions.
Economic Growth is clearly seen as a desirable objective for all economies. It is obviously important for the UK to keep growing at a similar rate as other rich economies globally, in order to remain competitive in terms of trade. The main advantages of economic growth include:
a) Higher levels of Employment â€“ or lower unemployment, however you look at it! An economy where demand is rising and businesses are growing is likely to have in it ample capacity to employ more and more people in its growing industry.
b) If growth leads to higher employment and higher wages, then it follows that Govâ€™t tax revenues increase also. This might allow the Govâ€™t to replenish some of the Budget Deficit.
c) Living Standards â€“ tend to improve in a growing economy. Living Standards are generally measured in real GDP per capita, so if Real GDP really is increasing positively...