Economic Growth - Explanation

Economic growth is growth in the level of national income. There are various measures of national income, but the one used in the Virtual Economy model is gross domestic product. We measure growth as the percentage change in GDP. However, it is very important that we only take the percentage change in real GDP. This means the change in GDP after inflation has been taken into account.

Economic growth tends to follow a cyclical pattern. There may be boom periods when economic growth is faster, but these may well be followed later by periods when the economy slows right down. This pattern is known as the trade cycle or business cycle. This can be clearly seen from the history of economic growth over the last two decades. The diagram below shows this:

Economic Growth 1979-1998

Why not also have a look at the relevant theories about economic growth, or have a go at a worksheet about it?