costs and benefits of economic growht

Question 1

theres huge benefits of growth but also issues with

Answer 1

unrestrained economic growth

Question 2

how many benefots of eocnommic growth are there

Answer 2

4

Question 3

state the 4 benefits of economic growht

Answer 3

higher employment

higher disposbale income

higher profits for firms

higher fiscal dividend

Question 4

state 4 costs of economic growth

Answer 4

demand pull inflartion (MO conflict)

current account deficit (MO conflict)

income inequality

environmental costs (non core macro obj)

Question 5

explain how higher disposable income is a benefit of eocn growht

give me about 9 poitns

Answer 5

firms make more profits

translate some into higher wages and salaries

+ workers getting jobs they didint have before

existing workers get promoted

exisiting worekrs could be becoming more productive so can ask for higher incomes

therfore they can access a better standard of living materially/non materially

people are feeling more optimistic and happeir - increases consumer confidence

in developig countries this is beautiful as can alleviate absolute poverty massivley

get spiral effects of increased AD can increase multiplier too leaidng ot more growth

Question 6

what is maerial standard of living

Answer 6

access to phsyical goods and services such as food

Question 7

non material standrd of living

Answer 7

access to intangble goods such as health care

education transport

Question 8

explain how higher employment is a benefit of economic growth

gimme 4

Answer 8

more econ growth = more demand for goods and services

as labour is a derived demand for firms to meet output employ more workers

workers earn more income to improve living standards

this also frees up the government finances - as spend less on unemployent beenfits if mroe people are in work - can put instead into training to imporve long run productive capa ity of country

Question 9

explain how higher profit for firms is a benefit of econ growth

Answer 9

as households earning and spenidng more

firms getting more sales

this incfeases profits

firms can invest in more capital goods

means can make more profit overtime as production process more efficient and reduces LR costs

can elad to accelarator effects of more investment

Question 10

what is the accelerator effecct

Answer 10

growth triggers investment

whihc triggers more growht and more investment so increases growth rate over time

Question 11

explain how higher fiscal dividend for gov is a benefit of economic growth

5/6 points please

Answer 11

income tax increased as households are getting moreincoem

Vat increases as more income is spentt on goods and sservices in econ

corp tax increases as firms maek more profit

tariff revenues increased as households spend on imports

this means gov can spend in economy more easily on health education and increasing welfare of citizens , public sector wages whihc can have knock on effects of even more growth

e.g spending on education incfeases means increased quality of fop shoft lras right leading to economic growht as well as increased prodcutive capacitu and lower inflationary pressures

Question 12

what does increased fiscal dividend mean

Answer 12

increases tax rev for gov

Question 13

explain how demand pull inflation is a cost of economic growth

Answer 13

epecially if Actual grow is greater than potetial growht with a +ve ouptu gap

DPI erodes purchasing power so a hihger SOL may not occur to levele we’d like - as consumers arent able to increae material and non material SOL as thought

Question 14

income inequality as a cost of econ growht

what does it means and summairse the 5

Answer 14

income may not be distriuted across econ very evenly

dominnat sector

capital intensive prod

urban areas

jobs created may not ay well

dont have income distributing policies

Question 15

explain income ineuality interms of dominant secotr

Answer 15

growth could arise from a dominnat sector

e.g oil in nigeria , finanical serice sin the UK

therfore increased income is contined in one sector which can increase the distribution of income inequality and wealth

Question 16

explain income inequality in terms of capital intensive productino

Answer 16

if most of economic groth comes form capital intensive production as opposed to labour

we wont see wide spread increeases in economic growht rather

increases to owners of the capital

Question 17

explain income ineuaity in terms of growth from urban areas

Answer 17

if it occurs in urban areas and not rural areas this can elad to an income divide

as seen in teh UK wiht the north south divide

i.e if incoems rise in cities but but those in rurual areas still owrk in agriculture with lower wages

this is unfair

Question 18

explain income inequality in terms of jobs created may be paid poorly

Answer 18

jobs created may be of poor quality hours and people may be underemployed creating a further income divide

Question 19

expain income inequality in terms of not having income redistributing policies

Answer 19

all of the problems of income inequality made worse if gov dont have income redistributing policies

i.e gov that dont enforce welfare state

means income divide will persisit

so those on lower Y continue to live in relative/absolute poverty even though econ growth taking place

Question 20

explain how environmentla costs are a -ve of econ growth

Answer 20

china and india are great example

e.g air pollution , deforestation can create negatove externalities of conumption
whihc brings with that a welfare loss

hihger standards of living ecompass health, educarion , income . so although SOL increase on monetary side if comes with destruciton of enviro people could actually be made worse off

Question 21

how can econ growht widen CA deficit and whats important about his

Answer 21

macro econ obj conflict

household incomes rise therfore more demand and consumption on imorts

import expenditure rises

which widens currebt account deficitn

ask is it okay to bring in fact leads to weak pound and this may decrease CA (marshall lener )

Question 22

what is a social cost of maxing economic growth

Answer 22

get this econ growth from people working longer hours so miss out on leisure time

Question 23

counter argue the popele have to work more idea of econ growth

Answer 23

econ growht and highe rproductivity enables people to work less

Question 24

another social cost is the disease of

Answer 24

affluence

Question 25

what is the disease of affluence

Answer 25

higher growth, we have chosen a richer (higher fat, sugar) diet, which causes problems such as diabetes and heart disease. - put more pressure on nhs which is already struggling

Question 26

rather than trying to stop econ growht what should we concetrate on

Answer 26

improving the nature of economic growth and being aware that many factors determine the desirability of economic growth.

Question 27

what are our 6 evals point

Answer 27

sustainable growth -

inclusive growth

balanced growth

role for private sector

role for gov

rate of growth

Question 28

explain eval for rate of growth

Answer 28

depends how fast growth is , if its going relativley slow we may not have as strong -ve consequences , move more slowly = lower inflation i.e people getting higher income slower so spedning is increasing but no too fast reducing inflation problem

Question 29

explain eval of sustainable grpwth

Answer 29

depends if its causing inflaiton /disruption to the enviro

Question 30

explain eval of inclusive growth

Answer 30

wabt it to benefit everyone not just dominant sector/owners of capital

Question 31

explain eval of balanced growht

Answer 31

dont want groth to to be from just one dominnant sector or AD variable

but multiple differnet sources so if we ceash/obsolete growht can continue from other places

further more reduces chance of demand shock ? - cuase if one industry where to drop out of existence we would get masive shock to AD

Question 32

explain evak role of private sector

Answer 32

pay workers well - depends how much they increase salaries by , and look to reduce costs so may not increase staff salry by that much +

look after enviro

invest well so growht continues alt could buy capital with higher income to max prodcutivity whihc could lead to job losses - but depends on elasticity of labout and if workes can use machinery

Question 33

eval role of gov

Answer 33

depedns if using tr well

econ growth not bad if gov use SSP to avoid potential conflict of inflation

ensure distribution of income so everyone beenfits