How is economic growth typically measured?

Economic growth is typically measured by real GDP growth over time because Real GDP represents the value of all final goods and services produced in an economy, adjusted for inflation. This measurement provides a comprehensive picture of economic activity, enabling comparisons across different time periods. In contrast to nominal GDP, which can be inflated by price increases, real GDP focuses on the actual increase in volume of production, making it a more reliable indicator of an economy’s performance and growth.

When assessing economic growth, analysts look for trends in real GDP over quarters or years. A consistent increase in real GDP indicates a healthy and expanding economy, while stagnation or decline suggests economic troubles. This metric is widely adopted because it encapsulates various aspects of the economy, such as investments, consumption, and government spending, thus offering a broad view of economic health.

Other measures listed, such as changes in employment rates, total consumer spending levels, and income inequality, provide insights into different facets of the economy but do not serve as direct indicators of overall economic growth. For instance, while employment rates can reflect labor market conditions, they do not account for productivity changes or overall economic output. Similarly, consumer spending is a significant part of GDP but does not capture the entire economy's performance independently. Income inequality highlights