Economics » Economic Growth and Development » Introduction to Economic Growth and Development

Meaning and Scope

Generally, economic growth is defined as the expansion in a nation’s real output. Some economists however, prefer to define economic growth as the expansion in a nation’s capability to produce the goods and services its people want. Economic Growth refers to an increase in real aggregate output (real GDP) reflected in increased real per capita income. A country is said to experience economic growth if over time, its real output (real GDP) increases as well as its real per capita income. The rate of economic growth is measured as the percentage increase in real GDP over time. We need to distinguish between growth in real GDP and economic growth. Growth in real GDP refers to increase in real GDP on yearly basis. Economic growth on the other hand shows sustained increase in real GDP over a period.

Economic development is not the same as economic growth. Economic growth is a necessary, but not sufficient, condition for economic development. This presupposes that there is more to economic development. Economic development is a sustainable increase in real GDP that implies increased real per capita income, better education and health as well as environmental protection, legal and institutional reforms and an efficient production and distribution system for goods and services.

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