Economic growth is an increase in the amount of goods and services produced by a country. It can be caused by increasing the size of the workforce or by increasing the productivity of that workforce. Both methods can produce economic growth, but only sustainable productivity growth can increase living standards.
Over the long term, a country can achieve sustainable economic growth by increasing the productivity of its people. This can be achieved by improving education or through technological advances such as better equipment. However, this type of economic growth is slow. It takes a long time for investments to pay off and it can be difficult to get more people to enter the labor force.
In the short term, economic growth can be fueled by a recovery from a recession. During a recession, more people are unemployed and businesses slow their production. This leaves unused resources that can be put to use during a recovery. Similarly, increased demand for goods and services can fuel economic growth by using up unused resources.
In the short run, economic growth can also be fueled by government spending on large infrastructure projects or through monetary policy (changing interest rates to encourage borrowing). However, these kinds of activities are typically short-term and do not improve the productive capacity of the economy in the long run. In addition, they can have negative side effects such as crowding out private investment in other areas of the economy.