Long-run growth theory

Long-run growth theory explains how and why an economy's total output or production increases over time. It suggests that factors such as improvements in technology, increases in human capital, and accumulation of physical capital (machines, infrastructure) drive sustained economic growth. These improvements enable workers to produce more goods and services, leading to higher living standards over the long term. The theory emphasizes that while short-term fluctuations happen, consistent growth depends on innovations, investments, and policies that support productivity and innovation, ensuring the economy continually expands in a stable way over years and decades.