ECONOMIC GROWTH

Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is measured as the percentage rate of increase in the GDP, usually in per capita terms.

Over long periods of time, even small rates of growth, such as a 2% annual increase can have large effects. This is due to the power of exponential growth. This can be better explained using the rule of 72, a mathematical method which states that if something grows at the rate of x% per year, then its level will double every 72/x years. For example, a growth rate of 2.5% per annum leads to a doubling of the GDP within 28.8 years, whilst a growth rate of 8% per year leads to a doubling of GDP within 9 years. Thus, a small difference in economic growth rates between states can result in very different standards of living for their populations if this small difference continues for many years.