How does an economy ‘grow’?

Question

Is it basically the average person spent £100 last month, and £105 this month so the economy grey 5%?

In: Economics

Answer 1

A lot of things in economics make more sense if you think not in terms of money but in terms of good and services being exchanged. So if you rephrase your statement:

> Is it basically the average person *produced goods and services worth* £100 last month, and £105 this month so the economy grew 5%?

Then the answer is yes, sorta.

We use currency to measure this is because it’s easier to calculate, but it’s the goods that matter. Because you use money you have to worry about inflation. If people produce £105 this month, and that’s just because everything got 5% more expensive then the economy did not grow.