economics test 6/3/25

Question 1

what are the benefits of economic growth on consumers

Answer 1

• less unemployment: businesses have the ability to expand, and are gaining more investment.
• increased government finance from higher tax revenues means further spending on public services.
• reduced poverty as increase in access to education, healthcare

Question 2

what are the costs of economic growth on consumers

Answer 2

• income inequality increases, those on low fixed incomes might feel worse off during high inflation
• high demand pull inflation due to increased consumer spending, leads reduced purchasing power.

Question 3

what are the benefits of economic growth on firms.

Answer 3

• make more profit, so increased investment and business confidence.
• increased investment can lead to technology development to cut production costs in long term.
• firms may face more competition making them more productive and efficient, and give them access to more sales.

Question 4

what are the costs of economic growth on firms.

Answer 4

• firms face more menu costs due to rising inflation as they have to keep changing their prices.
• resource depletion due to growth of gdp compromising sustainability.

Question 5

what are the benefits of economic growth on the government

Answer 5

• budget deficit decreases, as higher tax revenues and less welfare payments for unemployed.

Question 6

what are the costs of economic growth on the government.

Answer 6

• rapid growth fuelled by excessive borrowing may lead to financial bubbles and subsequent crashes.