QUORA *: What does it mean in economics when there is growth in a state’s economy? Why should the economy always be growing?
Here is my answer:
What we call “the economy” is the cumulative sum of all individuals engaged in productive work and trade under a common political system. Economic growth essentially equates to a general rise in the productivity of that productive work, which over time results in a rise in the general standard of living. If a rising general economic quality of life is the standard, then we should want a growing economy, with its consequence of more and better business, entrepreneurial, and job opportunities; more and better consumer products; more and better savings and investment opportunities; etc. Of course, a substantial level of individual intellectual, political, and economic freedom is essential to achieving a growing economy.
Measuring economic growth has proven to be problematic. The Bureau of Economic Analysis, a division of the United States Department of Commerce, reports on the economy in two ways. Gross Domestic Product (GDP) measures “final output”--that is, finished goods and services. Gross Output (GO) measures total economic activity in the production of new goods and services, which includes all of the economic activity that goes into producing the finished goods and services. GDP is the more commonly reported statistic, even though GO is considered a more comprehensive and much more accurate measure of the economy. But neither is perfect.
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