Economic growth

Economic growth is a central focus in macroeconomics, referring to an increase in the output of goods and services over time. Economists measure this growth with gross domestic product or GDP, which totals the value of everything produced within a country's borders in a year. Higher output usually means improved living standards. It's important to distinguish between total GDP, which shows economic size and GDP per capita, which reflects average income. Growth is typically expressed as a percentage change in real GDP, adjusted for inflation. At the heart of economic growth are productive factors, land, labor, capital, and technology. Their productivity determines a country's ability to generate output. Investment is key. When societies invest some current output in machinery, infrastructure, education, and research, they create new productive capacity and foster technological innovation, boosting future output. The trade off between consumption and investment balances, immediate well being with future growth. Structural shifts from agriculture to industry and then to services have also transformed economies and enhanced growth potential. Although GDP growth is widely used as an indicator of economic progress, it has limitations. GDP does not consider income distribution, so rising GDP can occur even as inequality grows. It also misses much of the informal economy and ignores factors like leisure, health, or environmental quality.