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Home→The Westburn Dictionary of Marketing→E→economic growth

economic growth

Definition:
Generally taken to mean an increase in national income or in the total volume of capacity to produce and volume of production of goods and services of a country. However, there are many ways of defining and measuring economic growth. Each is problematic in relation to income, it may be done firstly by examining total real income over a long period of time. But even though this allows for changes in the value of money and cyclical swings in output, it may be that increase in real income is accompanied by even faster growth in population so that the average standard of living is reduced. The second method - dividing increase in national income by increase in population giving increase in income per head - avoids this problem but takes no account of distribution of wealth. To take this into consideration a third measure, income per head supplemented by information on the distribution of income can be used. In relation to production, economic growth is often measured by the annual increase in a nation's gross national product, as adjusted for price changes. A better measure is increase in real gross national product per capita, but as with income, yearly gains in output may be surpassed by gains in population leaving the average person with a lower standard of living. Even when population changes are taken into account growth rates do not always accurately measure changes in the standard of living. Comparative growth rates must also be treated with care. Because of business fluctuations, output rarely rises smoothly and evenly from one year to the next. By careful selection of beginning and terminal years, it is possible to make economic growth in one period good or bad in relation to another. The comparison of international economic growth rates is even more complicated due to differences in definitions and accounting methods. The rate of economic growth, despite the difficulties of measurement, is used as an indicator of the increase in the real standard of living of a people.

Cross-References:
[developing countries]

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© Westburn Publishers Ltd 2002, The Westburn Dictionary of Marketing edited by Michael J Baker, ISBN 978-0-946433-01-8. www.themarketingdictionary.com. Entry: [Joanna Kinsey and Michael J. Baker], [1998].