Economic Growth Rate

Economic Growth Rate: Economic growth rate is a percentage of growth in gross national product of any particular economy over a period of time (mostly estimated on yearly basis). Calculated in “real” terms, this growth rate is adjusted for inflation, thereby arriving at a more accurate growth rate. The economic growth theory refers to increase in prospective output in a state of complete employment.
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The most important factor affecting economic growth is the level of productivity which is measured in terms of economic output to input. In case 2 successive quarters depict a drop in growth rate, it’s called a state of recession.  Contrarily 2 successive quarters showing increase in growth depict an expanding economy. Economic growth is assessed via annual percentage of change in GDP (Gross Domestic Product). The Classical Growth theory suggests that production and growth depends on law of variable proportions or law of diminishing returns, which explains that increasing a single factor of production while keeping the rest as constant would certainly yield low productivity at some point.

Edited and Updated 15th February 2014

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