Economic Growth Rate
Candlefocus EditorThe economic growth rate is measured by the nation's gross domestic product (GDP). To calculate a nation's GDP, the total of all goods and services produced within its borders is added up. This number is then compared to the GDP of the previous year to determine the economic growth rate. Generally, economic growth is seen as a positive development when the GDP of a nation is increasing on a year-over-year basis.
When determining a nation's economic growth rate, economists look at factors such as consumer spending, imports and exports, investments, and government spending. Business investment and consumer confidence can be important factors, too. Positive economic developments, like an increase in the demand for goods and services, an increase in consumer spending, and a decrease in unemployment can all lead to increased economic growth.
Sustained economic growth is an important component of a nation's economic health. For example, the United States has seen strong economic growth for more than a decade, which has given businesses the opportunity to increase capital spending and investment. This investment can create jobs, which then generates consumer spending and fuels the economic cycle.
At the same time, economic downturns can be incredibly disruptive, which is why many countries strive to ensure an environment which can be conducive to economic growth. The United States, for example, has liberalized trade policies and tax cuts with the intention of stimulating investment and consumer spending in order to achieve higher economic growth rates.
While the economic growth rate is an important indicator of overall economic health, many other factors must be taken into consideration. A nation's political stability, lack of corruption, and social welfare policies can all have an impact on economic health. By understanding these factors, governments and businesses can take steps to create policies that foster a healthy and stable economic environment.