Impact of Economic Growth

Question 1

Benefits of Economic Growth

Answer 1

Higher living standards

Employment effects

Fiscal dividend

Accelerator effect

Question 2

Drawbacks of rapid economic growth

Answer 2

Risk of higher inflation and higher interest rates

Environmental effects

Inequalities of income and wealth

Question 3

Causes of Long Run Economic Growth

Answer 3

Land

Labour

Capital

Technological Progress

Efficiency

Question 4

What would all economists agree than an increase in LRAS will increase? And how?

Answer 4

Potential level of output in an economy

Increase in the quantity or quality of the inputs to the production process

OR

Existing inputs are used more efficiently

Question 5

Impact of economic growth on consumers

Answer 5

Rising incomes - afford to buy more goods and services - only if it doesn’t benefit the most well off in society

Easterlin Paradox

Question 6

Impact of Economic growth for firms

Answer 6

Higher revenue - rising incomes

New firms to enter markets

Question 7

Impact of economic growth on the government

Answer 7

Tax revenues should rise - rising incomes

Rising private sector spending - demand for similar rises in public sector spending

Question 8

Impact of economic growth in the environment

Answer 8

For rich countries - less pollution and cleaner environment

Developing countries- increase pollution and degrade the environment

Question 9

Impact of economic growth on the economy

Answer 9

Growth in GDP - later economy

More jobs are being created - may be few of workers are more productive