Understanding whether the economy is growing or not is important to people, businesses and even governments. Economic growth usually means that people and companies are earning more money and generally feel better off. It also means that businesses and people are producing more goods and services. Economic growth is hard to measure, and the numbers that are reported often don’t really describe what is actually going on. This article will take a look at the different ways that economists try to measure economic growth and why some measures are better than others.

Economic growth happens when there is a change in the aggregate market value of an economy’s output, usually measured as GDP or other comparable measures. This increase in production usually, but not always, correlates with higher average marginal productivity. Increased average marginal productivity leads to an increase in incomes, inspiring consumers to open their wallets and buy more, driving a material rise in the quality of life for the majority of the population.

This process can be driven by either an increase in the amount of physical capital goods, or through technological changes that lead to higher labor productivity. In the latter case, newer, better tools will allow workers to produce more output in a given period of time than old, less-efficient ones. An example of this would be the invention of a printing press in the 15th century, which allowed a single worker to produce several books per day, rather than just one book at a time.