Readers Question: Evaluate The importance of increasing income per head for an economy.
Higher income per head means that GDP per Capita is higher.
This means there is an increase in living standards as more people can consume higher levels of goods and services.
Increased GDP per Capita will improve government finances. This is because people will pay more income tax and more VAT; firms will pay more corporation tax. Also the government will spend less on income support and unemployment benefits. Therefore the budget deficit will decrease. Also the government could decide to spend more on investing into the economy. e.g. spending on better roads. This will enable higher rates of growth in the long term.