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Economic growth

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Introduction

Rapid Economic Growth brings few benefits to businesses and causes great problems. To what extent to you agree with this statement? (15 Marks) Economic growth is the increase in the level of economic activity or real GDP (gross domestic product) within a nation. Economic growth affects businesses in different ways, but it does depend on how quickly the growth occurs as to whether it has a positive effect or not. It is normally measured using GDP, and a rise in GDP usually represents a higher standard of living. Most countries will attempt to improve their economies over a period of time, as this can increase levels of consumer spending, improve profit margins for businesses and therefore make more money for the government. For businesses, rapid economic growth is likely to be more of a problem than a benefit. While it has the potential to increase sales and generate more profit for the company, it also put a large strain on the workforce. ...read more.

Middle

These external influences reduce social welfare and can lead to market failure as more and more consumers become more environmentally aware. Growth that leads to environmental damage can have a negative effect on people's quality of life in the long run and may also impede sustainable growth. On the other hand, businesses can generally enjoy higher sales and increased profits. In the short term, rapid economic growth could be sustained for companies who are currently not working at a full capacity. They have the option of recruiting more employees to help them meet the demands of the economy. By offering jobs, they would be reducing unemployment in that area, meaning that those people would have more money to spend, thus encouraging a quicker economic growth. Economic growth normally has a positive impact on company profits & business confidence; this is good news for the stock market and also for the growth of small and large businesses. ...read more.

Conclusion

This graph shows that low economic growth has the same level of benefits that rapid economic growth does. While rapid economic growth can be good, it holds a lot of negatives that could be more damaging than a steady level of growth. Benefits are at their highest when growth is steady. Sales will increase gradually, meaning businesses enjoy higher profit margins, and the government will receive increased tax revenues, thus being able to spend more on the public by improving the NHS, roads and public transport sectors. If the standard of living continues to increase, people will continue to have more money to spend, providing the tax and interests rates stay the same. Overall, rapid economic growth affects businesses in different ways, but it does depend on the size and current capacity of the business. Some businesses have the capabilities to prosper in periods of high economic growth, while others will falter because they simply cannot deal with the extra pressures that will be put on them. ...read more.

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