Why is economic growth desirable?

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Economic Growth

Why is economic growth desirable?

A positive change in the level of production of goods and services by a country over a certain period of time. Nominal growth is defined as economic growth including inflation, while real growth is nominal growth minus inflation. Economic growth is usually brought about by technological innovation and positive external forces.

The two main ways of measuring economic growth.  The first way is GDP and the second GNI.

GDP measures the output produced by factors of production located in the domestic country regardless of who owns these factors.

GNI is the sum of value added by all resident producers plus any product taxes (less subsidies) not included in the valuation of output plus net receipts of primary income (compensation of employees and property income) from abroad. GNI per capita is gross national income divided by mid-year population. 

As GDP is a measure of living standards, we can say that as the economy grows, then GDP increases.  If there is increased output our living standards will increase and because of this there will be more consumers demanding the goods and there will be an increase in supply of these goods. This increase in output brings many positive effects to the economy, the main one being employment.

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If there is an increase in output there will ultimately be many more jobs available.  This means that unemployment levels will decrease and there will be a positive feeling towards the economy. People will have more money and may use this to improve their living conditions by buying consumer goods.  This then produces a cumulative effect because, the more consumer goods that are demanded, the more will be made and the larger the output.  If less people are unemployed then more people will be contributing towards tax and therefore government spending can increase, improving living standards. The government will not ...

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