Economic Growth (Types of EG)

Question 1

Define sustainable growth

Answer 1

It refers to strong and stable growth without significant environmental degradation and depletion of resources to future generations.

Question 2

What are some policies used to ensure sustainable growth?

Answer 2

• Taxes (Carbon tax, goods tax)
• Subsidies in R&D and green technology
• Legislations to prevent over-usage of resources (Quotas, ITQs)
• Campaigns to minimise waste and encourage recycling

Question 3

What are some benefits of sustainable growth?

Answer 3

-> Sustained growth benefits:
- Rising profits, expenditure of R&D
- Improved material SOL
- Rising employment and wages
- Improved government budget

• Securing the future
• Improved non-material SOL

Question 4

Define inclusive growth

Answer 4

It refers to strong and stable growth without worsening income inequality through the re-distribution of income.

(Includes poor and rich, or low-skilled and high-skilled workers)

Question 5

Name some advantages of inclusive growth

Answer 5

Advantages of sustained growth:
- Rising material SOL
- Improved government budget
- Rising investment on R&D
- Rising employment and wages

• Reducing social friction
• Improved social mobility and productivity

Question 6

Name some disadvantages of sustainable growth

Answer 6

• Contraction of some industries may lead to greater unemployment and falling wages
• Greater unemployment of low-skilled labour
• Effects to AD/AS

Question 7

What are some policies that promote inclusive growth

Answer 7

• Re-distribution of income through a progressive tax system
• Implementation of a minimum wage
• Direct subsidies to lower-income households
• Skills upgrading

Question 8

What are some disadvantages/limitations of inclusive growth?

Answer 8

• Reduced incentive to innovate and work due to the increase in taxes on the higher-income earners. People are motivated to work due to a wage differential.
• Increases COP due to minimum wage
• Government budget