The costs and benefits of economic growth

Key terms

Standard of living: Standard of living includes all the elements that affect people's well-being, whether they are bought and sold in the market or not.
GDP per head: GDP per head is a country's GDP divided by its population, the average output produced for each person in it.

Sustained growth is what raises living standards over a lifetime

The economists who wrote the OpenStax text put it strongly: nothing matters more for people's standard of living than sustained economic growth. Small differences in growth rates compound. An economy growing at 1 per cent a year takes 50 years to raise GDP per head by about two-thirds; one growing at 5 per cent does the same in about ten. Higher GDP per head usually comes hand in hand with better education, health and environmental protection. Growth also creates jobs, so unemployment tends to fall in an upswing.