Growth

Question 1

what is economic growth?

Answer 1

Economic growth is when there is an increase in GDP in an economy for two consecutive quarters. We measure the increase as a percentage. When there is economic growth, there is more money in the circular flow (there is more output, input and expenditure.)

Question 2

what causes economic growth?

Answer 2

1. anything that causes AS to shift right.

2. anything that causes a change in AD.

Question 3

what are the pros of economic growth?

Answer 3

 Higher living standards – lifts poverty
 Employment effects – helps lower unemployment rates which helps reduce inequality
 Government will collect more tax and thus increase government spending
 Growth stimulates investment, even better if it is foreign.
 Higher income – more disposable income
 More freedom in regards to choice. More money gives you a wider range of products to buy.
 Can assist rapidly growing populations.
 Businesses could expand internationally increasing injections through globalisation.

Question 4

what are the cons of eco growth?

Answer 4

 Risks of higher inflation
 Risk of higher interest rates to combat inflation which could promote saving.
 Increases environmental issues
 Higher amounts of goods and services doesn’t always result in higher happiness
 Full capacity damages business confidence.
 More non-renewable sources will be used.
 Bad for low-skilled workers as the economy can replace you with e.g. a computer
 The results of the product. E.g. whilst tobacco caused economic growth in previous years, it now costs the NHS a considerable amount.