2.5.4: The Impact of Economic Growth Flashcards
1
Q
What are some of the impacts of economic growth on consumers (advantages) ?
A
- More jobs, leads to higher wages, leads to increase in disposable incomes
- Increase in consumer confidence
- Increase demand for housing, leads to increased house prices
- Increase value of shares as well
- Increased value of houses and shares leads to the a positive wealth effect
2
Q
What are some impacts on consumers (disadvantages)?
A
- Demand pull inflation
- could lead to increased inequalities and so
may not have any effect on the average consumer
3
Q
Impacts on Firms (advantages)
A
- Increase in investment
- Higher profits/ sales
- Greater innovation through investment
- Increase in productive potential
4
Q
Impacts on Firms (disadvantages)
A
- Higher inflation, leads to higher menu costs/ higher costs of production
- If growth is unsustainable, workers are less productive
5
Q
Impacts on the Government (Advantages)
A
- Higher tax revenue
- Lower spending on benefits
- Opportunity to invest more in public goods
- Budget surplus (cash inflow)
- Lower unemployment
6
Q
Impacts on the Government (Disadvantages)
A
- If there is more consumption in the economy, there will be more consumption on demerit goods, which produces negative externalities
7
Q
A