What Are the Different Measures of Economic Growth?

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  • Written By: A. Lyke
  • Edited By: Michelle Arevalo
  • Last Modified Date: 16 September 2019
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Economists measure the economic growth of an area or a nation for a number of reasons, including investment potential, to assess the locations’ standard of living and to project future financial growth. There are several ways to measure economic growth, including figuring the gross domestic product and studying consumption patterns. Other measures of economic growth encompass a variety of evaluations of social conditions. These may include life expectancy, quality of health care, and general level of wages.

Some researchers consider the gross domestic product as one of the primary measures of economic growth. Abbreviated as GDP, this measurement is the calculation of an economy’s annual total value of the output of goods and services for a given year. GDP may be looked at in two ways — the calculation is both the total amount of money spent to buy products and that derived from creating products. High GDP often means that a country is economically healthy and that many of its citizens are prospering.

An economy’s minimum wage is one of many earnings-based measures of economic growth. Other general wage measurements include worker’s hourly pay, annual salary for specific industries, or average annual wages for the entire population. Similar to GDP, higher average and minimum wages often signify a relatively healthier economy.


Another economic measure is the rate of consumption of goods, which includes the calculation of total products bought during a specific time period. This formula may not be as reliable as other measures of economic growth because different factors can cause fluctuations in consumption. For example, sometimes it goes up because the citizens are prosperous and able to buy more, while other times, consumption goes up because the prices of goods and services have fallen.

A rise is life expectancy, or average number of years lived per person, is a longer term economic growth measurement. Areas with longer life expectancy tend to have wealthier populations who have continuous access to food, clean water, and health care. Life expectancy rates usually change more slowly than other forms of growth measurement because it may take a long time to increase the health of an entire population.

Related to life expectancy, access quality health care may be used as a more abstract measure of economic growth. Total health care spending tends to increase along with rising GDP and income levels. Higher health care spending may coincide with better quality health care and longer life expectancy, representing and indication of longer lifespans in the future.


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Post 3

I once took part in a very interesting computer simulation on this topic. In the simulation, as a country's GDP increased, life expectancy and literacy rates increased too. Infant mortality decreased (because of better health care) and so did unemployment. So these are definitely good measures of economic growth.

Post 2

The problem with GDP in my opinion is that it just shows the numbers, how much product/money a country has. It doesn't though, specify where the product comes from and whether the GDP is sustainable. So I think that GDP can be a tricky measure of economic growth.

If the GDP comes from production such as manufacturing, farming and exports, that's great news. But if most of the GDP comes from foreign investment, privatization of national assets and hot money, that's bad news. If there is conflict or war, the investors will disappear; national assets will run out and hot money will stop flowing in when those countries find more profitable exchange rates elsewhere. These are not sustainable sources of product.

Post 1

Our instructors in school always talk about GDP. A GDP that's growing at a high rate is considered to be biggest sign that an economy is growing and prospering. This is why developing countries like China and Brazil were taken so seriously in 2010s. It wasn't because they had become major economic powers, it was because they were on their way to become major economic powers due to their high GDP growth rates.

So countries often keep track of how fast other countries are growing to predict what the global economy will look like in the future. Powerful economies want to know who their new adversaries will be.

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