'Economic growth is always
beneficial to an economy. To what
extent do you agree with this
statement?'
, 'Economic growth is always beneficial to an economy. To what extent do you agree with this statement?'
Economic growth measures the rate of change in a country’s output, it’s an expansion of the productive potential of
an economy; an increase in Real GDP. Growth comes from an expansion of both the quantity and quality of factor
inputs reflected in higher productivity and the growth enhancing effects of innovation. Economic growth can be very
advantageous for an economy as it results in low unemployment, increased fiscal dividend, higher profits and
investment thus enabling growth to persist over time. In this essay, I will explore the benefits and costs of economic
growth and explore whether economic growth is ‘always’ beneficial to an economy.
Economic growth can be extremely beneficial for an economy as this can result in a fall in unemployment. Since
labour is a derived demand and demand for goods and services are increasing, firms are going to require more
workers in order to produce extra output; this reduces unemployment in an economy thus lowering absolute poverty.
Furthermore, as there are more people employed in an economy, factor incomes will rise therefore increasing
consumption, stimulating AD and material and non- material standards of livings increase. The multiplier effect that
this increase in consumer spending generates can materialise an even greater increase in growth and income.
Economic growth can also be extremely beneficial due to the fiscal dividend it provides for the government. With
greater levels of economic growth, tax revenues from income tax, corporation tax, VAT will rise. Greater levels of tax
revenue will result in the government having more money to spend on public services in the economy such as
education and healthcare. With money being invested into these vital services, this will improve the inputs and result
in long run economic growth. With the government spending on education this will improve the skills and therefore
productivity of the labour force, improving human capital. Additionally, this reduces structural unemployment as
people will have the skills to fill job vacancies in the economy thus increasing the quality of labour and thus long run
aggregate supply. Moreover, economic growth allows absolute poverty to be reduced; households are able to
educate themselves, consumer more, have greater access to healthcare thus aiding in improve their living standards.
Since 1990-2010, China’s production doubled and this resulted in 600 million people lifted out of absolute poverty;
their access to sanitation, clean water was much greater than before and social mobility had increased for many.
China’s situation depicts how beneficial and advantageous economic growth can be for an economy as it highlights
the improved living standards and material wellbeing they experienced. Overall, this enables economic growth to
persist over time and enables people to feel the positive, favourable effects of this on themselves.
On the contrary, rapid increases in national income can result in an increase in relative poverty and income
inequality. With rapid, unsustainable increases in growth it is likely that only one group, the wealthy, experience the
benefits of economic growth therefore resulting in greater inequality amongst those who are poorer. The rich tend to
see greater benefits as they own assets and have high paying jobs in contrast to the poor who don’t have these; this
is why economic growth isn’t always beneficial. Furthermore, corrupt governments may prevent the effective
redistribution of income from higher levels of GDP and increases in tax revenue promoting income inequality in
beneficial to an economy. To what
extent do you agree with this
statement?'
, 'Economic growth is always beneficial to an economy. To what extent do you agree with this statement?'
Economic growth measures the rate of change in a country’s output, it’s an expansion of the productive potential of
an economy; an increase in Real GDP. Growth comes from an expansion of both the quantity and quality of factor
inputs reflected in higher productivity and the growth enhancing effects of innovation. Economic growth can be very
advantageous for an economy as it results in low unemployment, increased fiscal dividend, higher profits and
investment thus enabling growth to persist over time. In this essay, I will explore the benefits and costs of economic
growth and explore whether economic growth is ‘always’ beneficial to an economy.
Economic growth can be extremely beneficial for an economy as this can result in a fall in unemployment. Since
labour is a derived demand and demand for goods and services are increasing, firms are going to require more
workers in order to produce extra output; this reduces unemployment in an economy thus lowering absolute poverty.
Furthermore, as there are more people employed in an economy, factor incomes will rise therefore increasing
consumption, stimulating AD and material and non- material standards of livings increase. The multiplier effect that
this increase in consumer spending generates can materialise an even greater increase in growth and income.
Economic growth can also be extremely beneficial due to the fiscal dividend it provides for the government. With
greater levels of economic growth, tax revenues from income tax, corporation tax, VAT will rise. Greater levels of tax
revenue will result in the government having more money to spend on public services in the economy such as
education and healthcare. With money being invested into these vital services, this will improve the inputs and result
in long run economic growth. With the government spending on education this will improve the skills and therefore
productivity of the labour force, improving human capital. Additionally, this reduces structural unemployment as
people will have the skills to fill job vacancies in the economy thus increasing the quality of labour and thus long run
aggregate supply. Moreover, economic growth allows absolute poverty to be reduced; households are able to
educate themselves, consumer more, have greater access to healthcare thus aiding in improve their living standards.
Since 1990-2010, China’s production doubled and this resulted in 600 million people lifted out of absolute poverty;
their access to sanitation, clean water was much greater than before and social mobility had increased for many.
China’s situation depicts how beneficial and advantageous economic growth can be for an economy as it highlights
the improved living standards and material wellbeing they experienced. Overall, this enables economic growth to
persist over time and enables people to feel the positive, favourable effects of this on themselves.
On the contrary, rapid increases in national income can result in an increase in relative poverty and income
inequality. With rapid, unsustainable increases in growth it is likely that only one group, the wealthy, experience the
benefits of economic growth therefore resulting in greater inequality amongst those who are poorer. The rich tend to
see greater benefits as they own assets and have high paying jobs in contrast to the poor who don’t have these; this
is why economic growth isn’t always beneficial. Furthermore, corrupt governments may prevent the effective
redistribution of income from higher levels of GDP and increases in tax revenue promoting income inequality in
