Macro - Impact Of Economic Growth Flashcards
How does economic growth impact consumers?`
Consumer Income - An increase in economic growth causes unemployment to decrease as incomes rise therefore an increase in Consumer Incomes.
Reduction in Unemployment - Causes an increase in real GDP which results in an increase in Economic Growth. Then reduces the amount of spare capacity within the economy.
Cost of living/high inflation - An increase in AD causes an increase in the general price level of goods/services within the economy as a result of an increase in the pressure on existing factors of production. Causes the purchasing power of money to decrease
How does economic growth impact firms?
Increase Revenue and profits for firms - Increases in economic growth are largely down to increases in consumer spending, as this is the main component in AD, businesses therefore will see a rise in Sales.
Increased Investment - Due to more confidence and profits businesses often tend to invest more leading to increase in productivity or efficiencies.
However there will be a decrease in the amount of labour to choose from as the new unemployment rate decreases firms have less people to choose from when hiring new staff
How does economic growth impact the government?
An improvement in the government budget balance - An increase in economic growth is often spurred by an increase in consumer expenditure. This increase in consumer spending will cause an increase in Tax Revenue
However there will be a worsening in the BOP - As consumer incomes increase, so will the demand for goods/services means there will be greater imports.
Also high levels of Inflation may occur.
How does economic growth impact current and future living standards?
A decrease in absolute poverty rates - an increase in economic growth cases a reduction in unemployment and an increase in Income. As a result of this there is an increase in the number of consumers that have stable and regular incomes
