Costs and benefits of economic growth
- Created by: Francesca Hill
- Created on: 06-06-14 12:31
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- Economic growth
- Benefits
- Improvements in living standards
- Growth is an important avenue through which per capita incomes can rise and absolute poverty can be reduced in developing nations,
- 'Trickle-down effect'
- More Jobs
- The accelerator effect of growth on capital investment
- Rising demand and output encourages investment in capital
- Helps to sustain GDP growth by increasing LRAS
- Rising demand and output encourages investment in capital
- Greater business confidence
- A growing economy boosts tax revenues and generates the money to finance spending on public and merit goods and services without having to raise tax rates.
- Potential environmental benefits
- As countries grow richer, they have more resources available to invest in cleaner technologies
- As nations develop, energy intensity levels fall
- The effect of growth are cululative
- Improvements in living standards
- Costs
- Inflation risk
- if demand races ahead of AS the scene is set for rising prices
- Structural inflation
- if demand races ahead of AS the scene is set for rising prices
- Environmental concerns
- Negative externalities
- e.g. noise, air pollution
- Increase in household and industrial waste
- Negative externalities
- Uneven distribution of the effects of economic growth
- Rising inequality
- Degradation and depletion of worlds scarce resources
- Rainforests and clean water
- May limit consumption patterns in the future
- Rainforests and clean water
- Inflation risk
- Benefits
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