2.5.4

Question 1

what is the main contribution to an improved living standard

Answer 1

economic growth

Question 2

benefits of economic growth

Answer 2

• increased incomes lead to better standards of living
• Decreased levels of absolute poverty
• Improvement in the quality/quantity of
  environmentally friendly technologies
• Higher sales revenue for firms and greater profits
• Increased investment by firms increases the
  potential output of the economy
• Reduced expenditure by government on benefits
• Higher government tax revenue due to rising
  incomes and surging corporate profits
• increased employment resolves some of the negative social impacts of unemployment

Question 3

negatives of economic growth

Answer 3

• Rising aggregate demand causes demand pull inflation; purchasing power of people on fixed incomes may fall
• Lack of equity in the distribution of income-
  the rich may get richer and the poor poorer
• Environmental damage caused by negative externalities of production
• Increased inflation can harm export sales
• Decreased export sales may lead to a delay in investment by firms
• Increased income usually leads to greater consumption of demerit goods
• Greater output often requires more time from
  workers and can decrease leisure time and well-being