Discuss the extent to which economic growth may benefit an economy. (18)
Economic growth is an increase in the output that an economy produces over time, for the minimum of two consecutive quarters. Economic growth can benefit an economy in a number of ways. Firstly, higher average incomes, this allows consumers to enjoy more goods and services and enjoy better standards of living. This in turn could lead to the ‘Trickle Down’ effect, those who are the highest income earners spending their disposable income on goods and services in the economy, those lower income earners could benefit from this as that money gets filtered through all sections of the economy. Therefore, many people in the economy will benefit from an increase in average
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In turn, more investment will result in an increase in aggregate demand and therefore encouraging a steady cycle of economic growth which is desired by many economies. Taking all these points into account, economic growth can benefit an economy in a number of ways. On the other hand, economic growth can also potentially negatively impact an economy such as inflation. If aggregate demand increases at a faster rate compared to aggregate supply then economic growth will be unsustainable in the long run. Economic growth tends to cause inflation when the growth rate is above the long run trend rate of growth, which is when demand increases at such a rapid rate that an economy will get a positive output gap and this will result in firms pushing up prices resulting in inflation.
This diagram shows how an increase in aggregate demand from AD to AD1 can cause and increase in real GDP from Y1 to Y2. However the price level has also risen from P1 to P2, this is demand pull inflation as aggregate demand is outstripping aggregate supply.
Another potential cost of economic growth is a current account deficit. An increase in economic growth may cause an increase in the spending on imports, if this results in the number of imports being greater than the number of exports then there will be a current account deficit. This in turn may cause a deficit in the balance of payments possibly resulting in a loss of confidence by foreign
Australia’s economy is much better then South Korea’s. This essay will be comparing five different areas of the economy. These include economic growth and the quality of life, employment and unemployment, distribution of income, environmental sustainability and the role the government in health care, education and social welfare. Income is a necessity to achieve higher living standards. Australia’s average household income is 31 197 USD per year, South Korea’s average household income is only 18 035 USD per year.
Economic growth is an increase in the capacity of an economy to produce goods and services from one period of time to another. In simple terms, it refers to an increase in aggregate productivity.
The problem of inflation increases the price of goods, which is obviously an increase in the
Economic growth is a common term used by economists to describe in increase in production in the long run. According to Robinson (1972) economic growth is defined as increases in aggregate product, either total or per capita, without reference to changes in the structure of the economy or in the social and cultural value systems. The basic tool of measuring the economic growth includes the real GDP. It provides some quantitative measures in terms of the production volume.
Economic growth refers to the output of goods and services produced per capita in a nation over time. It is measured as the percent rate of increase in Real Gross Domestic Product(GDP) which is the value of total productions produced by an economy in
Economic growth is best defined as a long-term expansion of the productive potential of the economy. Sustained economic growth should lead higher real living standards and rising employment. Short term growth is measured by the annual % change in real GDP.
First of all, economic growth is one of the macroeconomic objectives that the government wants to achieve as a primary goal and it happens when there is a rise in the enlarged product of population and per capita consumption. According to Hoover (2011), economic growth is the total material output of good values and service values in the market, measured by Gross Domestic Product (GDP) in a specific period of time. The growth of GDP is measured by excluding intermediate consumptions (production and resale), purely financial transactions and second-hand sales, which prevents double counting. To obtain an accurate value of economic growth, GDP needs to include the total output of expenditures and incomes.
Another desirable effect of economic growth is increased tax revenue, the government receives more money from tax payers with out having to increase tax rates. If people are earning more, the more money they will pay in tax, the more money companies make the more tax they must pay to the government. The more money the government gains in tax revenue the more they can do to improve the country, they can invest in transport and infrastructure, they can make improvements to health care and they may even need to employ more people further reducing unemployment.
Economic growth can be defined as the Gross Domestic Product (GDP) of a country increasing. Economic growth in Australia is a reflection of its capacity to intensify it production of goods and services and its nominal GDP is typically attuned for inflation
suggests that, in the short term, the economy will be able to reduce unemployment below the
Economic growth is a necessary but not sufficient condition of economic development. There is no single definition that encompasses all the aspects of economic development. The most comprehensive definition perhaps of economic development is the one given by Todaro: ‘Development is not purely an economic phenomenon but rather a multi – dimensional process involving reorganization and re orientation of the entire economic and social system. Development is a process of improving the quality of all human lives with three equally important aspects. These are: 1.
Economic growth refers to the rate of increase in the total production of goods and services within an economy. Economic growth increases the productivity capacity of an economy, thereby allowing more wants to be satisfied. A growing economy increases employment opportunities, stimulates business enterprise and innovation. A sustained economic growth is fundamental to any nation wishing to raise its standard of living and provide a greater well being for all. Gross domestic product (GDP) is the monetary value of all final goods and services produced over a year. It is the total value of production within the economy. The total value of production is the total value of the final goods or services less the cost of
Firstly, it exerts economic growth. This is because government may have the available funds and therefore spends it on infrastructural development. As infrastructural development occurs, it is in a way creating jobs in the labor force. When that occurs more investors enter into the country to invest thereby creating more jobs leading to an increase in government revenue and high economic growth. When that happens, it is more beneficial to
This research also shows that economic growth, on average, raises incomes for both the rich and the poor. It helps to lift the poorest in society out of absolute poverty and does not automatically increase inequality. More importantly, no country has managed to lift itself out of poverty without integrating into the global economy.
February 10, 2009 The purpose of this note is to define the meaning of the term ‘inclusive’ growth. It is often used interchangeably with a suite of other terms, including ‘broad-based growth’, ‘shared growth’, and ‘pro-poor growth’. The paper clarifies the distinctions between these terms as well as highlights similarities.