eli5: How does an economy grow if the money supply doesnt increase in that same year? In gold standard suppose, gold reserves are not increased but economy still manages to grow. How is that possible, how is an economy growing on a stable money supply?
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Also interestingly the gross domestic product GDP often used in this conversation accounts for all resources of a country that are producible.
So let’s say a huge oil field was developed now the oil production rate doubled of a small country so the GDP grew and the economy ‘grew’. Similarly if the you opened a refinery on the coastline of said country and can now produce gasoline instead of exporting raw oil GDP up. Expand capture of naturals gas from the same field and install a pipeline inland and boom new production.
More esoteric examples of GDP growth is saying well now the banking industry created new derivatives or a fee for using ATMs. That is product as well. Lower the working age or even expand the working age population by having birth incentives 18 years ago and GDP has the potential to grow as well assuming there are jobs for those people.
Off topic but related and again I think interesting. National debt like in the US can be considered investment in future GDP growth. Make college free to the student? Well in the future you might yield a more educated workforce working in banking to take a share of the global banking market, or chip manufacturing, or tech in general, and you’ve realized a gain on that investment. Invest in social security and you get a stronger middle aged workforce now not needed to care for their elderly parents. There is and always will be endless debate about which programs yield more returns but in general this is the concept for why national debt is not bad. It just hasn’t paid off yet.
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