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The Desirability of Economic Growth.

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Introduction

The Desirability of Economic Growth The Benefits of Economic Growth 1. Economic growth means that real GDP has increased and therefore leads to an improvement in the material standard of living. This means that individuals have higher levels of real purchasing power enabling them to buy a greater volume of goods and services - increasing economic welfare ( bearing in mind individuals have unlimited wants ). For instance, as western economies have grown over the decades consider the changes in 'material ownership' of products such as ownership rates of cars, dishwashers, housing, the number of foreign holidays taken - all of which have continued to increase as real spending power has grown. 2. Higher real incomes have enabled individuals to have greater access to leisure time / activities. People can now satisfy their basic wants more easily, with less time worked and hence devote more time to leisure as they do not have to work as long to afford the basic necessities for life. ...read more.

Middle

2. With economic growth comes a growth in consumption, more resources are needed reducing the remaining supply of non-renewable resources such as fossil fuels ( oil, gas and coal ), metal ores and other natural resources. As these are used up at a faster rate, there are fewer supplies left for future generations. Thus the finite pool is more rapidly becoming exhausted. The growing affluence of consumers has led to for instance, the ever increasing rates of depletion of rain forests across the world. 3. With growth comes the creation of new, and expansion of, existing businesses. These produce a number of so-called external costs or negative externalities. These are the wider spill over costs imposed by firms on society and individuals. Areas of natural beauty such as the country side may be destroyed in the name of economic progress. Pollution in the atmosphere may be increased, as well as in rivers and on land as production levels increase to meet higher global demands for goods. ...read more.

Conclusion

If exports suffer and imports penetrate the country - then unemployment may increase in these sectors. ( Evaluation: a country will not necessarily lose its competitiveness straight away. It may take some time before the inflation differential between itself and its trading partners starts to make a difference - so we must be realistic !! ) 2. Fast economic growth, irrespective of the impact on inflation will worsen the balance of payments, as imports are increasingly purchased. 3. However, if inflation does creep-up then the problem that arises is the corrective action taken by the Monetary Policy Committee ( in the UK's case ) in raising interest rates. This is the automatic trigger that follows inflationary rises, as interest rates choke off excess demand. The problem is that higher interest rates depress economic activity, and can lead to firms having to lay-off workers as sales in the economy fall. Thus, the overheating economy may trigger a harsh period of high interest rates to cool inflation in turn imposing unemployment on the economy. Edexcel AS Economics Unit 3 Economics Growth The Blackpool Sixth Form College (c) 2002 BN 13/11/02 ...read more.

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