Economic growth is an exponential process because gains made in one year accumulate in future years.
A constant real economic growth rate is compounded from the base year going forward.It is compounded like the compound interest on a bank certificate of deposit.Because of this,the absolute nominal growth in dollar terms gets bigger each year.

Question

Quizplus · Accepted Answer

Economic growth is indeed an exponential process due to the compounding effect of gains made in one year that accumulate in future years. This results in a constant real economic growth rate that is compounded from the base year onwards, much like the way compound interest on a bank certificate of deposit works. As a result, the absolute nominal growth in dollar terms gets bigger each year, which further supports the idea that economic growth is an exponential process.

Economic Growth Is an Exponential Process Because Gains Made in One