Q&A - What is economic growth?
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Economic growth measures the percentage change in the value of economic activity in a year.
Traditionally, economic growth is measured by calculating the percentage change in the value of gross domestic product (GDP).
An increase in economic growth would arise if, in total, there is a rise in economic activity. For example:
• Businesses increasing the value of their investment or production
• Consumers increasing their spending on goods and services
• Governments spending more on public services and projects
Over the long-term, an economy like the UK can expect to grow steadily, perhaps by 2-3% per year on average. This has certainly been the experience in recent decades. Households have become better off. They can afford more and better products. The overall average standard of living (if measured using GDP growth) has risen.
However, look at the chart below, and you can see that the annual change in economic growth has varied from year-to-year:
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