Question

10) what are the two ways of defining economic growth (be specific in this answer and don't give any lame answers)

Answer 1

The two ways of defining economic growth are-

GDP growth- This is the year on year growth in the total GDP of the country. For example, US GDP in 2017 was 17.359 Trillion USD. The same in 2018 became 17.856 Trillion USD. So, GDP growth in 2017-18 was (17.856/17.359)-1=2.9273%.

There is a problem with this measurement. While economic growth indeed should measure the total wealth of the country (which GDP does), it should also measure economic growth at an individual level. So it may happen that even though the country's total GDP was growing, if the population is growing at an even faster rate, then the individual person is actually becoming poorer. This is where GDP per capita comes in, which is the second way of defining economic growth.

GDP per capita- GDP per capita is simply total GDP divided by the country's population. Continuing our previous example, US population in 2017 was 325147121. This gives us a per capita GDP of= 17.359 trillion/325147121=53356 USD. In 2019, the US population grew to 327167434. So the new per capita GDP became 17.856 trillion/327167434=54579 USD. The GDP per capita growth, hence, is (54579/53356)-1=2.292%.

Since GDP growth was higher than population growth, GDP per capita increased from 2017 to 2018- meaning people became richer (not accounting for inflation).

These are the two measures of economic growth.