Economic growth is a measure of increased wealth in a country or region. It’s the driving force that lifts people out of poverty and drives trade, technology, agriculture, business and financial services.
There are two main sources of economic growth: growing the labor force and increasing the productivity (output per hour worked) of that labor. Increasing the size of the population or number of tools workers have to work with can lead to more economic output, but it’s only by adding productivity that incomes and standards of living can rise.
The most important factor in achieving sustainable high rates of economic growth is improving the efficiency with which we produce goods and services. This is a long-term process that requires new ideas, new production techniques and new ways of combining existing inputs to create more goods or services.
A good example of this occurred in the 15th century when goldsmith Johannes Gutenberg combined his knowledge of movable type with the mechanism that operated his wine presses to develop the printing press. This enabled him to print books at a fraction of the time it had previously taken a single worker.
This increase in the production of goods and services leads to an increase in demand for those goods and services. Consumer spending is one of the largest components of demand and an increase in consumer spending can lead to increased sales revenues and profits for firms. This can lead to increased investment by firms and an increase in economic growth.