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The term "Living God" was in common use in the Old Testament, and when Jesus came He was naturally called the "Son of the Living God".
As you indicated, "Living" means alive. On the other hand, "Non-living God" is usually termed "false god" in the Bible, referring to a god that is a product of human imagination, a corruption of the true God Yahweh, resulting in idol worship. The prophets seriously warned Israel not to worship those gods because instead of giving life, one of them (Molech) demands child sacrifice! The prophets were relatively silent as to whether there are real demons behind those "gods" but emphatically warned Israel NOT to worship those "gods" because it broke covenant with Yahweh, invited curse and punishment, resulting in death not life.
When Jesus came, Jesus further revealed the true nature of Yahweh, so naturally the NT authors also gave Jesus the adjective "true" and encouraged the believers to beware of false teachers who propagated "false gospels" which corrupted the nature of Jesus and God in the NT period, and similarly broke the new covenant, invited punishment and resulted in death rather than life.
If we look at the range of uses in both OT and NT we can see within the context of those verses several reasons why the Biblical authors attached the adjective "Living":
In the OT:
In the NT:
Here's a good article going over various verbs that God did as a Living God: speaks, listens, takes initiative, reacts, saving, which then prompts us as believers to naturally want to serve Him.
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Jesus is not the Living God, he is son of the Living God.
We understand from a careful reading of the NT that Jesus is actually never called God, and Jesus himself spoke about how he has the same God we do.
Do not cling to me,” Jesus said, “for I have not yet ascended to the Father. But go and tell my brothers, ‘I am ascending to my Father and your Father, to my God and your God.’ John 20:17
Once raised from the dead, Jesus, ascended to heaven sits next to God, and still has a God. (Rev 3)
The Living God is a term used to seperate The Creator God, the Almighty, the Highest, from the many other gods that do not inhabit eternity as Yahweh does and always did. He is the only giver of life and possessor of life. All life comes from Him.
For as the Father has life in himself, so he has granted the Son also to have life in himself. John 5:26
Thus The Living God has shared His life with Jesus who was raised to new spirit life which he did not have before his crucifixion. Jesus also calls his God, the one true God.
And this is eternal life, that they know you, the only true God, and Jesus Christ whom you have sent. John 17:3
The devil is called ‘the god of this world’. He is not the true God and is created so life was given to him, he is not the living god either.