how to measure economic growth
the most common measure of economic growth is real gdp this is the total value of all goods and services produced in an economy with that value adjusted to remove the effects of inflation there are three different methods for looking at real gdp gdp the most popular way to measure economic growth is calculated by adding up all of the money spent by consumers businesses and the government in a given period the formula is gdp consumer spending business investment government spending net exports of course measuring the value of a commodity is tricky some goods and services are considered to be worth more than others for example a smartphone is more valuable than a pair of socks growth has to be measured in the value of goods and services not just the quantity another problem is that not all individuals place the same value on the same goods and services a heater is more valuable to a resident of alaska while an air conditioner is more valuable to a resident of florida some people value steak more than fish and vice versa a common approximation is the current market value in the united states this is measured in terms of u s dollars and added together to produce aggregate measures of output including gdp there are alternatives to gdp for example the world bank uses gross national income per capita which includes income sent back by citizens working overseas to measure economic growth classify countries for analytical purposes and determine borrowing eligibility 3