2.5.4 The Impact Of Economic Growth

Question 1

What is the impacts of economic growth on consumers?

Answer 1

• Increase demand for housing - also a positive wealth effect.
• Lower prices and higher quality goods

However, could lead to increased inequalities and can lead to inflation which has more negative effects for consumers.

Question 2

What is the impact of economic growth on firms?

Answer 2

• Increased investment as they have more money to invest and more money to be made.
• Business confidence / Animal spirits increase.
• Allows new firms to establish themselves.

However, firms who sell inferior goods may lose out. Changing technologies and globalisation also mean some firms find their markets disappearing.

Question 3

Impact of economic growth on the government?

Answer 3

• Tax revenues will rise = increased living standards or reduce budget deficit.

However, during economic growth people expect more from the government.

Question 4

How does economic growth positively affect current and future living standards?

Answer 4

• Lower poverty levels / less unemployment / increased wages.
• Housing and foods standards could rise.
• Increased govt spending on education, healthcare etc.
• People on higher incomes = buy cleaner fuels.
• More research and resources into innovate / R&D.

Question 5

What are the negatives of economic growth on current and future living standards?

Answer 5

• Enviromental degradtion.
• Income inequality decreases.
• Overconsumption / strain on natural resources.
• Inflation risks.
• Future generational costs.