GDP Growth

GDP Growth:

 Economicmic growth (GDP growth) refers to the percent change in real GDP, which corrects the nominal GDP figure for inflation. Real GDP is therefore also referred to as inflation-adjusted GDP or GDP in constant prices.

What causes GDP growth?

Broadly speaking, there are two main sources of economic growth: growth in the size of the workforce and growth in the productivity (output per hour worked) of that workforce. Either can increase the overall size of the economy but only strong productivity growth can increase per capita GDP and income.

Calculating the Real Economic Growth Rate

 GDP is the sum of consumer spending, business spending, government spending, and total exports, minus total imports. The calculation for factoring in inflation to arrive at the real GDP figure is as follows: Real GDP = GDP / (1 + inflation since base year).

What is a good GDP growth rate?

between 2% and 3%

Faster growth isn't always better growth. It must be sustainable. Economists agree that the ideal GDP growth rate is between 2% and 3%. Growth needs to be at 3% to maintain a natural rate of unemployment.

How do you increase GDP growth?

To increase economic growth:

• Lower interest rates – reduce the cost of borrowing and increase consumer spending and investment.
• Increased real wages – if nominal wages grow above inflation then consumers have more disposable to spend.
• Higher global growth – leading to increased export spending.

What happens when GDP decreases?

If GDP is slowing down, or is negative, it can lead to fears of a recession which means layoffs and unemployment and declining business revenues and consumer spending. The GDP report is also a way to look at which sectors of the economy are growing and which are declining.