Impact of Economic Growth 2.5

Question 1

Impacts of Growth on Consumers

4

Answer 1

Increased house prices due to increased demand & wages. Positive Wealth Effect

Lower prices or higher quality goods due to higher productive efficiency

Increased gov. revenue could lead to better quality of life through expenditure on healthcare, infrastructure

Could lead to increased inequality (positive wealth effects helping richer more) and inflation

Question 2

Impact of Growth on Firms

4

Answer 2

Increased investment due to business confidence

Greater technology due to investment, which should allow for lower production costs/greater efficiency

Higher profits due to higher demand and lower costs

Firms who sell inferior goods (negative YED) may lose out

Question 3

Impact of Growth on Government

3

Answer 3

Increased tax revenue due to greater employment and profits - can be invested into healthcare, infrastructure which will improve living standards

Reduced budget deficit

Greater expectations placed on the government due to greater revenue i.e. better education, roads

Question 4

Impact of Growth on Living Standards

5

Answer 4

Lower poverty levels

Life expectancy often increases

Increased government spending will improve healthcare, infrastructure

Argued that growth can deplete natural resources, however higher incoes mean people can afford cleaner fuels and energy sources, while increased gov. revenue can increase expenditure on research and innovation into clean energy

Can be increased inequality due to wealth effects (e.g. house prices)