ECONOMIC GROWTH

Economic Growth



Economic Growth

Introduction

Economic growth is the sustainable increase in production. (Barro 2004, Pg. # 1)

Economic Growth Indicator

An economic parameter describes an aspect or dimension of an economic system. An economic indicator is a measure of a parameter for an economy at a given point in time. A parameter may have several indicators, each measuring it differently. All the parameters of an economy together describe the overall behaviour of that system. A collection of all economic indicators describes the behaviour of an entire economic system at a given point in time (Burns & Mitchell, 1946).

Gross domestic product (GDP), which measures the total value of all goods and services produced in an economy, is probably the most important indicator of the performance of an economy. U.S. GDP for the first quarter of 2008 was estimated at $11.6 trillion. The change in the value of GDP from one quarter to another, in percentage form, is a measure of economic growth. When GDP is adjusted (deflated) for price changes, it is called real GDP. A positive percentage change in real GDP is an indication of expansion, and a negative percentage change is an indication of a downturn, or contraction. Real GDP grew by 0.9% in the first quarter of 2008, indicating a weak expansion. To study the behaviour of an economy, the change in the value of an indicator is more informative than the indicator's overall value (Frumkin 2006, Pg. # 255).

The Factors of Economic Growth Outweigh

A few other major parameters and their main indicators for the U.S. economy are (a) inflation and price stability, measured by consumer price index and producer price index; (b) employment and labour force use, measured by the unemployment rate; (c) efficient use of the employed labour force, measured by the productivity index; (d) cost of borrowing money, measured by the prime interest rate; and (e) consumers' future economic behaviour, measured by the consumer sentiment index.

In the United States, economic indicators are mostly produced by such federal government agencies as the Commerce Department, the Bureau of Labour Statistics, and the Federal Reserve Bank. The U.S. Congress compiles and publishes monthly reports on most of these indicators. A few indicators are also produced by major universities, such as the University of Michigan, and by economic research organizations, such as the Conference Board.

There are many ways to group economic indicators for systematically studying an economy. Three of them are presented ...