Consequences of economic growth

Question 1

benifit

Higher disposable income

because…

Answer 1

Because :
Firms are making higher profit, so they may be translating that into higher salaries for workers

Higher employment rates or existing workers are getting promoted and earning a higher wage that way

Workers are more productive and can command a higher income

This causes living standard to increase whether its buying more material things, or accessing better healthcare or education

Question 2

benifit

Higher employment

Answer 2

• When there is a country with increasing economic growth there is more demand for that country’s goods and services
• For firms to produce that output, they need to employ workers. → more people getting employed= having an income = better living standards

Question 3

benefit

Higher profit for firms

Answer 3

If households are earning and spending more, = higher profit for firms → firms can invest in capital = continuing profit over time, and can trigger the accelerator effect → growth triggers investment = more growth

Question 4

benefit

Fiscal dividend for Govt (increase in tax revenue)

Answer 4

• Income tax will rise due to households increase in income
• VAT tax revenue will increase because households are spending more on goods and services
• Corporation tax revenue will increase because firms are making more profit
• Tarrift tax revenue will increase because households are spending more on imports from abroad
• Increasing tax would mean that the govt can fund into the economy more easily= funding on health, education, infrastructure, wellfare

Question 5

Costs

Inflation

Answer 5

If actual growth is greater than potential growth with a positive output gap (when demand is very high and, to meet that demand, factories and workers operate far above their most efficient capacity).

If inflation increases, it will erode purchasing power meaning the higher living standards may not occur to the level we would like

Question 6

cost

Higher income inequality

Answer 6

Where income is not distributed evenly across the economy

Question 7

cost

Environmental costs

Answer 7

Issues such as :
* Air polution
* Deforestation - india and malaysia palm oil production as one of the biggest culprits
* Resource depletion
* Resource degeneration where waste resources are dumped into river and oceans
* Environmantsal costs cause negative externalities to third arties such as health problems like asthma