2.5.4 Impact of economic growth

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8 Terms

1
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CONSUMER- BENEFITS

  • increase in demand for housing as people have more money so can afford to buy properties- will increase house prices

  • shares are likely to increase in value as businesses are making more money and future prospects are good

  • rising prices of shares and housing will increase wealth and lead to positive wealth effect

  • improved productive efficiency due to better tech could lead to lower prices or higher quality goods

  • some argue that increased economic growth will lead to increased happiness- not necessarily the case

2
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CONSUMER- COSTS

  • could lead to increased inequalities and so may not have any effect on the average consumer and may lead to inflation, which has negative effects for consumers

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FIRMS- BENEFITS

  • investment will increase since businesses are more successful- will have more money to invest and more incentive to invest as they will know they can make money from their investments

  • business confidence will improve as there are potential demand increases for businesses’ products and this confidence will also lead to increased investment

  • as a result of increased investment from both businesses and govs, tech will improve

  • there will be more research and development done to invent more tech- likely to increase productive efficiency and lead to lower costs

  • combination of higher demand and lower costs is likely to lead to higher profits

  • economic growth also provides opportunity for new firms to establish themselves and allows existing ones to make more profit

4
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FIRMS- COSTS

  • firms who sell inferior goods (with negative income elasticities) may lose out

  • changing techs and globalisation also mean that some firms find their markets disappearing e.g. DVD rental stores

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GOVERNMENT- BENEFITS

  • tax revenues will rise as more g and s are being bought, more income is being earnt and more profits being made

  • means the gov has more money to put into the NHS, education, benefits etc.; quality of these systems will be improved, and this will help to improve living standards

  • can help to reduce budget deficit, perhaps even bringing about a budget surplus which would allow money to be saved for future recessions

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GOVERNMENT- COSTS

  • means people expect more from gov i.e. better education, better roads etc.

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CURRENT AND FUTURE LIVING STANDARDS- BENEFITS

  • EG will result in lower poverty levels

  • increase in the production of g and s will increase jobs so less unemployment and less people on benefits

  • wages likely to increase

  • there will be more g and s for people to enjoy

  • housing standards and quality of food increases due to EG

  • health usually increases: not only does life expectancy rise but people have a higher quality of life in old age

  • increased gov spending will lead to improved living standards both now and in future, as better educated people usually have higher living standards

  • EG is likely to have highest benefits in developing countries

  • could be argued that people w/ higher incomes able to buy cleaner fuels and richer countries can devote resources for research and development of cleaner resources and ‘greener’, more efficient tech

  • higher income households tend to have less children which lowers natural rate of population growth, meaning less resources needed for future

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CURRENT AND FUTURE LIVING STANDARDS- COSTS

  • could be decreased future living standards bc of exploitation of env

  • rise in income means more people have access to electricity etc. and use it more freely

    • causes depletion of non-renewable resources, concern about sustainability of growth for future gens and increased levels of pollution/waste/congestion

  • EG may result in increased inequalities

    • rich may be only ones that gained from EG and may even lower the living standards of poor by exploiting poor