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Analyse the effects of a rise in the UKs economic output

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Introduction

Analyse the effects of a rise in the UK?s economic output UK economic output rose by 0.8% between July and September. Economic output is the value of the goods and services produced by all sectors of the economy; agriculture, manufacturing, energy, construction, the service sector and government. Businesses will benefit from this as rising GDP may indicate rising incomes and increased spending on goods and services. This will generate more profit for firms and increased opportunities for future investment. This is particularly true in the housing market where construction companies are in high demand and the increase in supply of houses is boosting output and investment in this sector and beyond. ...read more.

Middle

Extra government revenue helps to reduce the budget deficit and consequently lead to more sustainable government finances. Higher output raises tax revenue without having to increase tax rates, and some of this extra revenue can also be used to improve public services, such as education and health care. Although incomes are rising, if the cost of living is rising at a faster rate due to inflation, it will have a negative effect on people?s standard of living. This is particularly true for certain parts of the UK. ...read more.

Conclusion

With high growth, demand rises faster than firms can keep pace with supply; faced with supply constraints, firms push up prices. Similarly, if aggregate demand does not increase in line with production, higher output may be accompanied by higher unemployment. If, for example, workers? productivity increases by 5 per cent, firms will be able to produce more output with fewer workers. If real GDP per head rises, the population can enjoy more goods and services. Of course, whether they all do so will be influenced by the distribution of income. Growth enables poverty within a country to be reduced without having to redistribute existing income. Higher output raises tax revenue without having to increase tax rates. Matt W ...read more.

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