Does an increase in national income due to price rises count as real economic growth?

An increase in national income arising solely from price rises does not represent real economic growth because real economic growth refers to an increase in the production of goods and services in an economy, measured in constant prices, rather than nominal values. Price rises can inflate the nominal income figures without any real increase in economic activity or output.

When analyzing economic growth, it is important to distinguish between nominal growth (which includes inflation) and real growth (which is adjusted for inflation). If income increases are solely due to rising prices, it indicates that consumers are paying more for the same quantity of goods and services, rather than experiencing an increase in production or an enhancement in the quality of life. Therefore, while nominal income may rise, it does not reflect an improvement in the economic capabilities of the country or its wealth in a meaningful way.

This distinction helps to understand the health of an economy. Only when there is an actual increase in the output of goods and services, beyond what can be accounted for by inflationary pressures, is there true economic growth.