Economic growth is a big concern for economists, but it’s also important to public- and private-sector leaders, and individuals. When economies grow, people and businesses earn more, buy more, and generally feel better off. But if an economy is stalled or contracting, they will earn less and spend less, and may even lose jobs.
A growing economy is typically characterized by a rise in real gross domestic product (GDP) and employment, which is measured by adding together the value of everything that people and companies produce and sell. This measure of real GDP is the key to understanding economic growth, and it reveals a lot about the economy’s health.
In a country with stable GDP and a steady workforce, families can afford to invest more and save more, which will lead to faster growth. Consumer spending, which represents more than half of GDP, rose at a 2.3% annual pace last quarter and is helping to propel the expansion. A rebound in business investment also contributed to the uptick, as did a lower-than-expected increase in imports.
Economic growth is important because it allows people to get richer without making others poorer. Before societies achieve economic growth, it was impossible to become richer without making someone else worse off; the economy was a zero-sum game. However, the rapid growth of China and India, which started at much lower income levels than the United States, shows that catching up is possible. These successes are a reminder that sustained economic growth is the only way to reduce global poverty and expand prosperity.