Economic growth increases the standard of living of people within a country. It makes it easier for them to afford a wide range of things that make them happy. Growth also allows poor countries to catch up with rich ones.
The most important source of economic growth is the improvement in the productivity of labor. Newer and better tools, such as fishing nets or drills, allow workers to produce more output during the same period of time. Economic growth can also happen by increasing the size of the labor force or the supply of raw materials. However, adding more chickens to the coop does not increase the number of eggs that you get unless you adjust nutrition and other factors.
A country’s economic growth is measured by its gross domestic product (GDP), which counts the market value of all goods and services produced in the country. The GDP figure is adjusted for inflation to give an accurate picture of economic activity. A person who goes to work in the paid labor force contributes to GDP; a person who stays at home to care for children or an aging relative does not. Health, safety, and environmental regulations may impose costs on businesses that slow measured GDP growth, but these costs must be compared with the benefits of better health, safer workplaces, and a cleaner environment that do not show up in the figures.
It is not clear whether economic growth is desirable or sustainable. For example, the higher living standards that come with growth can lead to an unhealthy diet, and increased congestion and pollution may reduce quality of life. Also, the use of non-renewable resources and carbon emissions exacerbate climate change, which will have costs for future generations.