6.2 Measuring Economic Growth

What is Canada’s economic growth rate as of 2022? According to Statistics Canada, Canada’s real GDP grew by 3.8% in 2022. How is this growth rate measured? Economic Growth is measured as a percentage change in real GDP between different time periods. If Canada’s real GDP for 2019 is $1.3 trillion and in 2020, real GDP changed to $1.22 trillion, then the economic growth rate between this one year would be:

[latex]\begin{align*}\left[\frac{\left(1.22 – 1.3\right)}{1.3}\right]=-6\%\end{align*}[/latex]

In our example, we find the annual economic growth rate declining during this time period. Suppose the real GDP in 2021 is $1.28 trillion; in 2022, the real GDP increases to $1.31 trillion. Then, how do we measure the average annual growth rate over this time period between 2019 and 2022? We would need to find the annual growth rate between 2019 and 2020 (i.e., −6%), between 2020 and 2021 (i.e. +4.9%), and finally, that of between 2021 and 2022 (i.e. +2.3%). The average annual approximate growth rate over this four-year time period would be an average of the individual growth rates during the three different one-year time periods:

[latex]\begin{align*}\frac{\left[\left(-6\right)+\left(+4.9\right)+\left(+2.3\right)\right]}{3}=0.4\%\end{align*}[/latex]