costs and benefits of growth

Question 1

benefits of growth

Answer 1

-higher disposable income: firms making higher profits passing on higher wages, people may be coming into work. leading to higher living standards
-higher employment: more derived demand, workers earning incomes
-higher profits for firms: invest in capital. increase their productive capacity, can lead to the accelerator effect
-fiscal dividend: increase in tax revenues. can be spent on the public sector

Question 2

costs of economic growth

Answer 2

-inflation: demand-pull (actual>trend), eroding purchasing power
-income inequality: one dominant sector, capital intensive, rural vs urban, no welfare state
-environmental costs: depletion and degradation (negative externalities)
-current account deficit: incomes rise, more imports

Question 3

evaluation of economic growth

Answer 3

-sustainable growth (no destruction, inflation)
-inclusive growth
-balanced growth
-role for private sector/government