Introduction
For many years, the economic growth of a country was measured as an indicator of the success or
failure of a country’s government. Economic growth is defined by the increase in a country’s Real Gross
Domestic Product (GDP) over a given period of time. By definition, Real GDP is defined as the value of
final goods and services produced in a given year at constant prices. This is measured as the sum of the
following 4 factors; Household Consumption ( C ) + Firms Investment (I) + Government Spending (G) +
Net Exports (X-M). As the economy grows, this generates more profit for firms in the economy.
Therefore this allows for stock prices to rise. Revenue generated from stocks are utilised as capital for
firms to invest and hire employees. This causes a creation of jobs while then causes household incomes
to rise. As incomes increase, this increases the spending (consumption) of the households for goods and
services which in the long run, spurs Real GDP and therefore creates a positive economic growth.
A government can intervene in the country’s economy by implementing monetary or fiscal policies that
would drive the aggregate demand and supply in the economy. Should the economy experience
inflation, the government should intervene by introducing contractionary policies. Similarly, if the
economy experiences a recession, the government should intervene by introducing expansionary
policies.
Benefits of Economic Growth
A clear benefit of economic growth is in the creation of more jobs. When Barack Obama took office in
2009, the United States of America was facing both the subprime mortgage crisis and the Great
