Economic growth is the increase in the market value of the goods and services produced

by an economy over time. It is conventionally measured as the percent rate of increase in

real gross domestic product, or real GDP. Of more importance is the growth of the ratio
of GDP to population (GDP per capita), which is also called per capita income. An
increase in per capita income is referred to as intensive growth. GDP growth caused only
by increases in population or territory is called extensive growth.
Growth is usually calculated in real terms i.e., inflation-adjusted terms to eliminate
the distorting effect of inflation on the price of goods produced. In economics, "economic
growth" or "economic growth theory" typically refers to growth of potential output, i.e.,
production at "full employment".
As an area of study, economic growth is generally distinguished from development
economics. The former is primarily the study of how countries can advance their
economies. The latter is the study of the economic aspects of the development process in
low-income countries. See also economic development.
Since economic growth is measured as the annual percent change of gross domestic
product (GDP), it has all the advantages and drawbacks of that measure. For example,
GDP only measures the market economy, which tends to overstate growth during the
change over from a farming economy with household production. An adjustment was
made for food grown on and consumed on farms, but no correction was made for other
household production. Also, there is no allowance in GDP calculations for depletion of
natural resources.

Calculating Growth Rates

1. Calculating Percent (Straight-Line) Growth Rates
The percent change from one period to another is calculated from the formula:

Where:
PR = Percent Rate
VPresent = Present or Future Value
VPast = Past or Present Value
The annual percentage growth rate is simply the percent growth divided by N, the number of years.

Example
In 1980, the population in Lane County was 250,000. This grew to 280,000 in 1990. What is the annual
percentage growth rate for Lane County?
VPresent = 280,000
VPast = 250,000
N = 10 Years

The population of Lane County grew 12 percent between 1980 and 1990 or at an rate of 1.2 percent
annually.

In economics, inflation is a persistent increase in the general price level of goods and
services in an economy over a period of time. When the general price level rises, each
unit of currency buys fewer goods and services. Consequently, inflation reflects a
reduction in the purchasing power per unit of money a loss of real value in the medium
of exchange and unit of account within the economy. A chief measure of price inflation is
the inflation rate, the annualized percentage change in a general price index (normally the
consumer price index) over time.
Inflation's effects on an economy are various and can be simultaneously positive and
negative. Negative effects of inflation include an increase in the opportunity cost of
holding money, uncertainty over future inflation which may discourage investment and
savings, and if inflation is rapid enough, shortages of goods as consumers begin hoarding
out of concern that prices will increase in the future. Positive effects include ensuring that
central banks can adjust real interest rates (to mitigate recessions),[5] and encouraging
investment in non-monetary capital projects.