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Glossary
Importance of a Growing Economy

A growing economy sounds like a healthy economy, right? Here are some specific reasons why a growing economy is important to a country's overall "well-being."

For one, a growing economy helps keep pace with a growing population.

To maintain the current standard of living—that is, the amount of goods and services available to each person in a society—the economy must grow at least as fast as the population is growing. Standard of living is measured as real GDP per capita—that is, a country's real GDP divided by the country's population. If the population is growing, and real GDP doesn't grow, the society's standard of living will decline. To improve its standard of living, a society's real GDP must grow faster than its population is growing.

Second, a growing economy puts a country in a position to meet new needs and resolve socioeconomic problems.

As economies develop, citizens expect more goods and services per capita—that is, an increase in income per capita. For example, in a more developed economy, citizens may expect air and water to be clean. They probably want a larger variety and quantity of goods and services. To provide more goods and services for the same size population, the economy must grow. Of course, this is equivalent to saying there must be more income per capita.

Because you have calculated percentage changes before, you are ready to calculate percentage changes in real GDP.

1. Ending point - starting point = amount of change
2. Amount of change ÷ starting point = decimal amount
3. Decimal amount x 100 = percentage rate of change

Suppose the data below are real GDP data for a very small economy for five quarters.

 Year 1, Quarter 1 real GDP was \$13,392 Year 1, Quarter 2 real GDP was \$13,551 Year 1, Quarter 3 real GDP was \$13,768 Year 1, Quarter 4 real GDP was \$14,084 Year 2, Quarter 1 real GDP was \$14,299

From quarter 1 of year 1 to quarter 1 of year 2, what was the percentage change in real GDP? Remember to round to the nearest tenth.