Economic Growth Rate

The economic growth rate measures economic growth—go figure, right? Specifically, it’s a calculation that subtracts new-GDP from old-GDP, and divides by old-GDP. And...that’s it.

The economic growth rate measures economic growth over some time period...depending on what GDP you’re using in your calculation. Quarterly, annually, or decade-over-decade are all common. When the economic growth rate is positive, everyone’s happy. When the economic growth rate has gone down two quarters in a row, we call that a recession. Sad face. Crying face happens when economic growth rate becomes negative, which means the economy is shriveling up like a prune.

A key thing about the economic growth rate is that it’s not adjusted for inflation. Rather, it’s a nominal reflection of growth if you use nominal GDP to calculate it. If you want to know what the real economic growth rate was, you’ll need to make sure you’re using real GDP to make your economic growth rate calculations.