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PinkPoodle

I don't understand why an economy that grows by "only" three percent is a bad thing.

Why isn't any growth considered good? Why doesn't a 3 percent increase mean things are 3 percent better? Wouldn't zero growth just mean we're no worse off than last year? I know there's something here I don't get- can someone explain?
.:

there are several different measures. a 'mature' economy grows by 2 to 4% and that is considered OK any more and there is a risk of inflation. (too much money chasing too few products). newer economies grow by as much as 12% simply because there is so much more room for growth, infrastructure, a car in every garage etc.
because we are a consumer, debt driven economy a certain amount of growth is needed to prevent a recession(ahem) which is officially defined to mean two quarters of negative growth, and somehow the USA still isn't 'officially' in a recession. guess we'll just skip that step and head straight into a depression...
3% growth doesn't mean things are 3% better, especially if the population grows faster than that. for instance, we may need 5% growth in foodstocks, or steel. plus, government figures can no longer be relied on.

PinkPoodle:

Seems to me then, that we should have one understandable number that factors growth, inflation, population etc. together. I appreciate the explainations, though and it makes more sense to me! Thanks for taking the time to answer!

Tigee:

I don't understand either growth of any kind is better isn't it

Sandra:

I think that a 3% growth is not really considered growth because of other factors that may affect that growth such as margin of error, unreported expenses and loss, Inflation and much more. That is why a 3% growth cannot be relied upon and cannot be considered growth.

Ed:

If you have zero growth, but you have a larger population, then the income per capita must be falling. Also, if you have 3% growth, but 5% inflation, then you are still falling behind, because your money has less buying power.

Ze'_Enigma of Dissidence..!!!:

A 3% growth as a measure of economy is meaningful only to the economists seeking to make a forecast. In actual terms it means that our Gross National Product has increased by $425,000,000,000. No small change to be sure.
However economists often like to compare our economic growth with other countries -- for example China growth is 10.5% compared to our 3% --- the comparison implies that China's economy is doing better. It may be, since the increase in dollars is almost twice as much as ours -- $818,000,000,000 -- yet their actual GDP is still half the size of ours.
What is really important in the percentage are the trends. The Federal Reserve uses the growth rate as one indication of whether the economy needs to be restrained or stimulated. For example, if the GDP growth rate is speeding up, the Fed may raise interest rates to stem inflation. You can also use the GDP report to see which sectors of the economy are growing and which are declining. This would help you determine whether you should invest in, say, a tech-specific mutual fund vs. a fund that focuses on agribusiness.
Sometimes those predictors of the economy don't work as well as excepted and that's what has contributed to the economic mess we are in today. Rising GDP growth rates are usually predictors of inflation. However our inflation trends increased as the result of the impact of crude oil prices and the oil price increases had little impact on our GDP since it only increased the flow of dollars out of our economy to benefit economic growth of oil producing countries.

PinkPoodle:

Thanks- very helpful answer!

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