• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Why is economic growth desirable?

Extracts from this document...


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. ...read more.


More people will also be in higher paid managerial jobs, therefore they will come into the higher tax bracket and income tax will increase. Adverse consequences of rapid economic growth. There is an inequality of income. Growth rarely delivers its benefits evenly. It often rewards the strong, but gives little to the economically weak. This will widen the income distribution in the economy. Pollution (and other negative externalities). The drive for increased output tends to put more and more pressure on the environment and the result will often be increased pollution. This may be water or air pollution, but growth also creates significantly increased noise pollution. Traffic growth and increased congestion are prime examples of this. Loss of non-renewable resources. The more we want to produce, the more resources we need to do that. The faster we use these resources, the less time they will last. Loss of land. Increased output puts further pressure on the available land. This may gradually erode the available countryside. Lifestyle changes. The push for growth has in many areas put a great deal of pressure on individuals. ...read more.


The workforce may increase due to immigration or a higher retirement age. A shift in aggregate demand The diagram below shows what is likely to happen. AS shifts outwards and a new macroeconomic equilibrium will be established. The price level has fallen and real national output (in equilibrium) has increased to Y2. A rise in aggregate demand is due to things such as increased government spending. If the government spends more in the economy this will almost certainly lead to an increase in aggregate demand. Higher real incomes will also do this because if peoples real incomes are higher, then they will feel as if they have money available to spend on consumer goods which increases the economies potential. Lower interest rates is also a componentl. If lower interest rates were introduced, then this may lead to increased expenditure because many people will feel confident and want to spend, not save, whilst they don't have to pay that much interest. They may wish to re morgage their house etc. Lower tax rates may also be a factor. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Economy & Economics essays

  1. Causes of the Great Depression

    largest banks were failing to maintain adequate reserves and were investing recklessly in the stock market or making unwise loans. In other words, the banking system was not well prepared to absorb the shock of a major recession. The banking system as a whole, moreover, was only very loosely regulated by the Federal Reserve System at this time.

  2. Economic growthis refers to the increase in real GDP per capita in one year. ...

    In the short-term EB does not seem to assist in promoting sustained economic growth, with the high social and economic costs of prospective job losses of employees in inefficient industries, as EB promotes the stepping away from union membership. EB however promotes sustained economic growth in the long term as

  1. The costs and benefits of economic growth.

    Service sector industries pollute but the long run transition from heavy industries might actually be beneficial to the environment. One criticism of this argument is that although an economy may change structurally in favour of a service-based economy it is unlikely that the demand for manufactured goods will fall.

  2. Is the Welfare State Desirable?

    be used against him, as he would find it difficult to know and establish when people were working against his good values. "Against the use of Nature" (1:3:27) when Macbeth says this it gives the audience a clear idea that he would not be willing to do anything bad or

  1. GDP and Growth

    to 1990 (5.72%). However, the problem is it caused high inflation, from 1987 (4.16%dRPI) to 1990 (9.44%dRPI), by the autumn of 1990, RPI inflation had gone up to 10.9%. The government had to raise the interest rate to slow down the economy, therefore the house prices fell and UK started to experience a recession between 1991 and 1992.

  2. Briefly explain why initial levels of GDP might influence subsequent economic growth.

    If we look at Japan the GDP is 1926 (1950) and the growth rate is 8 whereas the GDP is 11439 in 1973 and the growth is 2.3. So I observe that if initial GDP is small the growth is high and vice versa.

  1. What are the ecological consequences of global economic growth?

    (Cock and Hopwood 1996:95-96) More people also equal more demand for water, and water is said to be a very scarce commodity in many countries.

  2. Retailing In India - A Government Policy Perspective

    chains - that is reflected in its superior productivity performance compared to food. 2. Lack of exposure to best practice Competition in Indian retail is almost entirely domestic, and exposure to global best practice retailers is negligible. On the food side, only one foreign retailer - Dairy Farm - is

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work