Economics · Government and the macroeconomy. The idea in plain words, the rules to remember, the mistake to avoid and a worked example, written and checked by Mega Lecture.
Economic growth is an increase in a country's real GDP over time. Real GDP is the value of output with the effect of inflation removed, so it shows whether more goods and services are in fact being produced.
Growth comes from a rise in total demand, which uses spare capacity, or from more or better resources, which raises capacity. It can bring higher incomes, more jobs and more tax revenue, but also inflation, pollution, faster use of resources and wider inequality.
A recession is the opposite: real GDP falls for two quarters in a row. Unemployment rises, firms' profits fall, and the government collects less tax while paying more benefits.
A fall in the growth rate is not a recession. If growth slows from 5% to 2%, real GDP is still rising; a recession needs real GDP to fall.
Answer: The rate of economic growth is 4%.
Type what you are stuck on. The helper finds the explanation, worked examples and the notes to read, free and instant.
← Supply-side policyEmployment and unemployment →Take a Economics test