Impacts of Economic Growth Flashcards
What are the benefits of economic growth (9)?
1) Higher wages and incomes.
2) Lower unemployment.
3) Increased tax revenues for the government.
4) Increased life expectancy.
5) Better housing and sanitation.
6) Better health.
7) Better standard of living.
8) Improved education and literacy rates.
9) Improved balance of payments on the current account due to an increase in exports.
What are the costs of economic growth (3 factors)?
1) If the rate of growth is too high, production cannot keep up with demand, a cause of inflation.
2) Negative externalities, e.g. pollution, have to be fixed, and the government may have to spend to do so.
3) Higher incomes can result in an increase in imports, which can lead to a trade deficit on the balance of payments on the current account.
How does economic growth increase the standard of living?
Through improvements in technology, capital stock and infrastructure, higher quality goods and services are produced, increasing the living standard.
What are the two reasons why economic growth may be unsustainable?
1) Economic growth can result in an increase in pollution, damaging the environment.
2) In a capitalist economy, economic growth can increase the disparity in income inequality.
What is the Human Development Index (HDI)?
A measure of the standard of living.
How does economic growth impact firms (2)?
1) Most firms will see an increase in demand, causing a rise in revenue, as well as profit.
2) As the economy changes, some industries will decline/disappear, resulting in some business closures.
How does economic growth impact the government (2)?
1) As employment rates rise, so will tax revenues, whilst benefit payments will fall.
2) The government will have to minimise the impacts of economic growth, e.g. inflation, negative externalities and the balance of payments.
How does economic growth impact a population (2)?
1) Future and current standards of living will rise, due to a rise in household incomes.
2) The wealthiest will benefit the most from economic growth, with those in poverty seeing little benefit. If the country is developing, the poorest will see the most benefits from an increase in GDP.
