Economic growth is typically measured annually using the percentage change of real GDP for the year. Real GDP, or Gross Domestic Product adjusted for inflation, reflects the true value of goods and services produced in an economy over a specific period.
The reason we use the percentage change of real GDP is that it provides a clear and standardized way to assess the growth of an economy relative to its previous performance. This measurement allows economists and policymakers to gauge whether an economy is expanding or contracting and to compare economic growth among different countries or regions.
While other factors like productivity changes, capital investment, and their respective changes are important for understanding economic dynamics, they do not serve as the direct measure of economic growth itself. Instead, they contribute to the underlying factors that influence changes in real GDP.