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What Is Economic Growth and How Do We Use Gdp?

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Submitted By glea2010
Words 690
Pages 3
Glenda Stahl
03/13/16
Week Eight Homework

What is economic growth and how do we use GDP to measure an economy? Economic growth is measured by the value of all the products manufactured and sold in a country over the course of one year along with everything people do and get paid for. There are four categories that create GDP: consumers, investments, governmental spending and other companies that buy from another country. GDP measures income, but not equality, it measures growth, but not destruction, and it ignores values like social cohesion and the environment. However, there are countries that are trying to include social cohesion and the environment because it does have an effect on economic growth.
What cause or contribute to the growth of an economy? Economic growth is measured by real GDP growth where the ability of a country to increase the value if it’s production of goods and services after removing the effects of inflation. When people earn more money they buy more products which results in economic growth. Economic growth is important for a country because it leads to a better standard of living for all its citizens, even the poor. Countries with a good economy can offer better health care services, safer working conditions and spend more on insuring a cleaner environment. Also, economic growth allows countries to reinvest money into areas that will promote future growth such as education, technology, capital and infrastructure.
What is the rule of 70? The rule of 70 states that in order to estimate the number of years for a variable to double, take the number 70 and divide is by the growth rate of the variable. An example of this is taking the United States’ average growth, which is 3% and applying the rule of 70. You take 70 and divide it by 3 which gives you approximately 23. So it will take 23 years for the economy to double. Another

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