Discuss the benefits of economic growth

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Discuss the benefits of economic growth

Economic growth is simply, in the short run, the rise in real GDP due to rise in aggregate demand: and in the long run an increase in productive capacity (the maximum output that the economy can produce), meaning that the Factors of Production are either more efficiently used or more are discovered or found. Governments tend to try and achieve economic growth as it has many advantages, one of which is higher employment levels, which incidentally should lead to a decrease in unemployment. If more people who are willing and able to work in a country have a job (and therefore earning an income) the GDP of that country will inevitably increase and so if this high employment rate is stable and sustainable, economic growth, in the long run, will occur. Hence, employment figures could be seen as proportional to the GDP of a country. The employed workers are a Factor of Production called the labour force. If there is unemployment, then our Factors of Production are not being used as efficiently as possible and so the point on the Production Possibility Frontier will not be on the frontier itself, indicating that economic growth is not occurring as the productive capacity will not be increasing. However, if low levels of unemployment are sustained consistently, then you are using at least one Factor of Production to its full extent and so the productive capacity of the economy may increase.

        Another way in which economic growth may be desirable is that it may lead to an improved fiscal position. Fiscal policy is one of the key economic policies that governments use to influence economic activity and achieve their macroeconomic objectives. If economic growth is rising, then the income of worker’s may be considerably higher. If this economic growth is sustainable and stable, then the government may not be pressurised to change spending and tax rates regularly as revenues will tend to be higher and so the position will be more reliable. In contrast, however, to overcome any budget deficits, the government may be more content in slightly increasing tax rates due to the higher incomes as there may be fewer complaints from the public. Another reason that economic growth may improve the fiscal position is that as the GDP rises, the standards of living will improve. Therefore, this may benefit the government enough to reduce public spending on certain areas, meaning that the country may even record a budget surplus.

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        Economic growth can also reduce poverty within a country, without having to resort to redistribution of income. If people’s income increases, then tax revenues will automatically increase, without having to increase the rates. Some of this extra income to the government from tax can be used to finance schemes to help the poor, or even to improve public services, for example, education and health care, or even the environment. This will continue to improve the quality of life of the habitants of the country as it will be a very desirable place to live, economically and maybe geographically.

        Another potential ...

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***** A well considered piece of work that explains the benefits and costs of economic growth well.

Here's what a star student thought of this essay

The essay doesn't have the best structure. Yes, economic growth is defined in the introduction, but the introduction begins to analyse. I would've made sure the introduction is concise and sets up the argument. The style here is good, with each step of a mechanism flowing well from the next due to the language used. I like the use of technical terms and the definitions given, as this shows a strong foundation of knowledge. Spelling, punctuation and grammar are strong.

The analysis in this essay is good. The mechanisms are explained well. For example "Economic growth can also reduce poverty within a country" is not simply stated, with the essay going onto explaining how it can reduce poverty. Being able to explore concepts rather than assert them will gain you credit. I feel this essay could've elaborated upon points at times. The paragraph on international status needed to address why this is important to an economy. The exploration of sustainability is good, and there is good awareness of why this is significant to economic growth. Although not explicit, this is showing exploration of whether economic growth is desirable to different groups and viewpoints. I would make this more clear, as this shows strong analysis. For example, commenting that economic growth may not be favourable in the eyes of the poor due to widening inequality, but that it will be beneficial for the rich, will allow you to gain the top marks. I always ask myself "is it always?" and this prompts you to address the difference in viewpoints. You can take this further to look at different political and economic theories, but they aren't necessary.

This essay responds to the question at a good level, looking at the benefits of economic growth and the limitations. If I were answering this question, I would've looked at the difference between short-run and long-run growth, which would allow a judgement about whether both are desirable. The reason this essay doesn't access the top marks, despite the evaluative discussion of the limitations, is that there is no discussion of the extent. A paragraph such as "the extent to which growth is beneficial depends upon" would've enabled a strong essay. It is not good enough at A-Level to come to a conclusion and say "economic growth brings more desire than harm for a country". Although the word always isn't used in this sentence, it is suggested due to the lack of sometimes, or equivalent. It is essential to show the examiner that you are aware not all situations are the same, and unfortunately this essay doesn't do that.