First Bank Explainer: What is the Economic Growth and How Is It Measured?

Economic growth is an increase in the production of economic goods and services in one period of time compared with a previous period.

Traditionally, aggregate economic growth is measured in terms of gross national product (GNP) or real gross domestic product (GDP), although alternative metrics are sometimes used.

In simplest terms, economic growth refers to an increase in aggregate production in an economy, which is generally manifested in a rise in national income.

How to Measure Economic Growth

The most common measure of economic growth is the real GDP. This is the total value of everything, both goods and services, produced in an economy, with that value adjusted to remove the effects of inflation.