GDP growth is defined as the percentage change in GDP. It is a measurement that is used to see how much the income (which is a loose synonym for GDP) of a country has grown over a period of time - typically one year.
The formula for calculating GDP Growth is:
GDP Growth = [(GDP Current year - GDP Current year)/(GDP Current year) ]*100
Consider the following fictional economy.
If we wanted to calculate the GDP growth from year 2000 to 2001 we would calculate it as
((GDP in year 2001 - GDP in year 2000) ÷ GDP in year 2000) * 100
So we would get:
((200 - 100) ÷ 100 ) * 100 = 100% which tells us that the economy has grown by 100%.
Now if we calculated the growth from 2001 to 2002 we would get:
((300 - 200) ÷ 200 ) * 100 = 50%
In this case we only get 50% growth because the "base" (number we are dividing by) is larger. Now finally suppose that we wish to know GDP growth from the year 2000 to 2002. In this case the formula just becomes:
((GDP in year 2002 - GDP in year 2000) ÷ GDP in year 2000) * 100
((300 - 100) ÷ 100 ) * 100 = 200%
also note you can not find the GDP growth from the year 2000 to 2002 by adding up the growth rate from 2000 to 2001 (100%) and then from 2001 to 2002 (50%) as that would give you 150% instead of 200%.
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