Economic growth is like watching your pet grow; it’s about an increase in the size of an economy over time. In more grown-up terms, it's an increase in real GDP through time.

Measuring Economic Growth Imagine checking your height every year. That’s how we measure economic growth - by comparing real GDP between two periods. If the GDP grows, the economy grows; if it shrinks, we might be in a recession.

Real World Example 🌎

In 2019, the U.S economy grew by 2.33% (a high five to the U.S. economy!). If another country had a growth rate of -2.5%, that would mean a recession (uh-oh!).

Short-Term Growth: The Sprint 🏃

This is like a quick sprint; it's the result of using existing resources better.

• Causes of Short-Term Growth: Think of this as throwing fuel on a fire:

  • People and businesses feeling confident and spending more.

  • Lower interest rates (like a sale at your favorite store!).

  • Government spending more (like buying everyone ice cream 🍦).

  • The country's money worth less, making exports cheaper and boosting sales.

• Illustrating Short-Term Growth: Imagine a slider moving right, everything increases, and the economy gets a quick boost. You can also think of this as moving from a smaller room to a bigger one, with more space to grow.

Long-Term Growth: The Marathon 🏃‍♂️🏃‍♀️

This is the big picture. Long-term growth happens over time with more resources or better technology.

• Causes of Long-Term Growth: It's like planting a garden; you need the right things for it to grow over time:

  • More workers (more hands on deck! 🙌).

  • Better-educated people (smart cookies 🍪).

  • More machines and factories (more toys to play with!).

  • Amazing technological advances (like going from flip phones to smartphones 📱).

• Illustrating Long-Term Growth: Picture a stretchable rubber band. The more you stretch, the more growth potential you have. If short-term growth is a sprint, long-term growth is a marathon.

• Keynesian or Monetarist Diagram: Shows how aggregate demand shifts and affects real output.
• Production Possibilities Curve (PPC): Think of it as a boundary line, the closer you move towards it, the more you grow. If you move past it, that's long-term growth!