Key terms
- Economic growth
- Economic growth is a rise in real GDP, reported as the percentage change in real GDP from one period to the next.
- Potential growth
- Potential growth is a rise in potential GDP, the output an economy can produce by fully employing its labour, capital and technology.
Growth is measured in real GDP, so higher prices alone are not growth
When the news says the economy grew, it means real GDP rose: the output of goods and services, with the effect of inflation removed. Nominal GDP can rise simply because the same output sells at higher prices, and that is not growth. So a figure for growth is always a change in real GDP, and a rise in a cash figure has to be checked against inflation before anyone calls it growth.