Economic Growth

An economy grows when its capacity to produce goods increases, or when the market value of the goods and services it produces increases.

This can be a result of two things: inflation or real economic growth.

If the value of the goods and services produced increases by 1% from one year to the next, has the economy grown? Maybe, maybe not. If inflation is greater than or equal to 1%, then everything is valued at least 1% more, so the economy hasn't really grown. But if inflation is less than 1%, then the economy has grown.