Economic growth is incredibly important to economists. It is one of the most powerful and groundbreaking concepts in economics. Economic growth is defined by economists as either an increase in real GDP over time and/or an increase in real GDP per capita over time. Additionally, economic growth refers to an outward shift in the production possibilities curve that results from an increase in resource supplies, quality, or improvements in technology. Regardless of the definition of economic growth, it is calculated as a percentage rate of growth per quarter or per year.

In the fourth quarter of 2025, real GDP increased at an annual rate of 1.4 percent. In comparison, real GDP increased by 4.4 percent in the third quarter. Economists pay very close attention to small changes in the rate of economic growth since small changes in growth rates can have very large effects on the volume of output. For example, the difference between 3 percent and 4 percent growth rate is about $230 billion of output each year.

Increases in consumer spending and investment spending contributed to the increase in real GDP in the fourth quarter. However, these movements were offset in part by a decrease in government spending and exports. Imports subtracted in the calculation of GDP decreased. In 2025, real GDP increased by 2.2 percent compared with an increase of 2.8 percent in 2024. In 2025, the price index for gross domestic purchases increased 2.6 percent compared to an increase of 2.4 percent in 2024. 

Discussion Questions:

  1. What role does consumer behavior play in driving GDP growth, and how can it be influenced?
  2. Should GDP be the primary measure of a country's economic success? Why or why not?