Benefits of Economic Growth
Economic Growth means an increase in real GDP. This increase in real GDP means there is an increase in the value of national output / national expenditure.
The benefits of economic growth include:
- Higher Incomes. This enables consumers to enjoy more goods and services. Due to economic growth, developed economies have much higher living standards compared to 50 years ago. Economic growth is a key factor to enable developing countries to reduce poverty levels.
- Lower unemployment With higher output firms tend to employ more workers creating more employment.
From 1992 to 2005, a prolonged period of economic growth saw the unemployment rate fall from over 10% to 5%. The recessions of 1981, 1991 and 2009 saw unemployment increase.
- Lower Government borrowing. Economic growth creates higher tax revenues and there is less need to spend money on benefits such as unemployment benefit. Therefore economic growth helps to reduce borrowing. Economic growth also plays a role in reducing debt to GDP ratio.
- Improved public services. With increased tax revenues the government can spend more on the National heatlh Service and education e.t.c. Or the government can spend more on infrastructure projects, such as better roads and railways.
- Money can be spent on protecting the environment. Countries with higher living standards can afford the luxury of protecting the environment.
Evaluation of Economic Growth
- It depends on the type of economic growth. If growth is too fast and unsustainable, it will probably cause inflation.
- It depends on the equality of distribution - does everyone benefit from growth or is it focused on a few individuals?
- Is economic growth environmentally sustainable? or does growth come from exploiting non-renewable resources?
See also: costs of economic growth
Essays and Revision Notes on Economic Growth
- Economic Growth Notes
- Benefits of Economic Growth
- Causes of Economic Growth
- Causes of Recessions
- Costs of Economic Growth
- The Great Depression 1929-1939
- Trade Cycle
- UK Recession 1980-81
- UK Recession 1991-92
- Supply Side Policies
- Supply Side Policies in the UK
- Aggregate Demand