Impact of Economic Growth Flashcards
What are benefits of economic growth?
- Higher standards of living
- Greater profits for firms
- Job creation
- Reduced poverty
- Greater income equality
- Increased government revenue
- Investment opportunities
- Improvement in environment
How are higher standards of living a benefit to economic growth?
growth often leads to higher per capita
incomes, which in turn can improve the standard of living for a nation’s
citizens.
How are greater profits for firms a benefit to economic growth?
allows expansion and can create jobs
How is job creation a benefit to economic growth?
growth can help reduce unemployment rates and provide
individuals with greater financial stability
How is reduced poverty a benefit to economic growth?
growth increases access to education, healthcare, and
necessities leading to progress in reducing extreme poverty and
improvements in human development outcomes (HDI Index) such as
higher life expectancy.
How is greater income equality a benefit to economic growth?
more jobs, less poverty reduce inequalities and
the associated social problems.
How is increased government revenue a benefit to economic growth?
A growing economy generates higher
tax revenues – a fiscal dividend - that can then be used to fund better
public services such as education & healthcare
How are investment opportunities a benefit to economic growth?
growth attracts domestic and foreign
investment leading to innovation, increased productive capacity (LRAS),
and further job creation.
How is an improvement in the environment a benefit to economic growth?
more efficient, green and cleaner
technology is used
What are costs of economic growth?
- Inflation
- Environmental costs
- Income inequality
- Financial instability
- Wider trade deficit
- Sacrificing current consumption
- Human costs
How is inflation a cost of economic growth?
rapid growth can lead to demand-pull and cost-push inflation,
eroding real purchasing power and potentially leading to economic
instability.
How is environmental costs a cost of economic growth?
fast growth of GDP can lead to overexploitation of
scarce non-renewable natural resources, causing resources degradation
and depletion, compromising sustainability.
How is income inequality a cost of economic growth?
benefits of growth may disproportionately accrue to
certain segments of the population, leading to increased income &
wealth inequality as measured by the Gini Coefficient
How is financial instability a cost of economic growth?
if rapid growth is fuelled by excessive borrowing
and speculative investment, this can result in financial bubbles and subsequent crashes.
How is a wider trade deficit a cost of economic growth?
rapid growth means consumers/businesses will buy
from abroad if home supply cannot grow fast enough increasing
imports.
What is the Kuznets curve and what does it look like?
Kuznets curve suggests that economic inequality tends to increase during the
early stages of economic development, but then decreases as a country
becomes more developed.
What is the environmental Kuznets curve and what does it look like?
Environmental Kuznets curve suggests that environmental pollution tends to
increase as a country’s income increases during the early stages of economic
development, but then decreases as a country becomes more developed
