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The long-run path of economic growth is one of the central questions of economics; in spite of the problems of measurement, an increase in GDP of a country is generally taken as an increase in the standard of living of its inhabitants. Over long periods of time, even small rates of annual growth can have large effects through compounding (see exponential growth). A growth rate o 2.5% per annum will lead to a doubling of GDP within 28 years, whilst a growth rate of 8% per annum (experienced by some Four Asian Tigers) will lead to a doubling of GDP within 9 years. This exponential characteristic can exacerbate differences across nations. For example, the difference in the annual growth from country A to country B will multiply up over the years. A growth rate of 5% seems similar to 3%, but over two decades, the first economy would have grown by 165%, the second only by 80%.

In the early 20th century, it became the policy of most nations to encourage growth of this kind. To do this required enacting policies, and being able to measure the results of those policies. This gave rise to the importance of econometrics, or the field of creating measurements for underlying conditions. Terms such as "unemployment rate", "Gross Domestic Product" and "rate of inflation" are part of the measuring of the changes in an economy.

In mainstream economics, the purpose of government policy is to encourage economic activity without encouraging the rise in the general level of prices (in other words, increase GDP without creating inflation). This combination is seen as, at the macro-scale (see macroeconomics) to be indicative of an increasing stock of capital. The argument runs that if more money is changing hands, but the prices of individual goods are relatively stable, then it is proof that there is more productive capacity, and therefore more capital, because it is capital that is allowing more to be made at a lower cost per unit. See Economies of scale, Inflation, Hyperinflation, Price, Supply and demand.

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