How does the economy “grow”? Where does the new money comes from?
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The “growth in the economy” is measured by a growth in real GDP. GDP is the total value of all goods and services produced in a country. Real GDP is GDP but adjusted for inflation. We use real GDP to evaluate whether the economy is actually growing or if it’s just too much money chasing the same number of goods.
Basically, an increase in real GDP means more stuff and more valuable stuff is being made.
A growing economy is one of three macroeconomic goals. These are: Unemployment at its natural rate, strong economic growth (increase in real GDP), small and steady inflation.
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