A Nation Can Achieve Higher Economic Growth if

Economical growth means an increase in real GDP – this leads to higher output and higher average incomes.

Governments frequently effort to increase the growth charge per unit because it will have various advantages. These include

Benefits of economic growth

Increased consumption. Firstly, higher GDP implies the economy is producing more than goods and services and therefore consumers tin can savour more goods and services. If human welfare is linked to consumption then growth volition benefit society. Higher levels of consumption will help to reduce any incidence of accented poverty (when people tin't meet bones necessities of life.) This may not be and then obvious for developed countries, like the Britain and United states, but for developing economies, economic growth and rising incomes play a big part in lifting people out of poverty.

Higher investment in public services. With higher GDP the government will be able to collect more taxes; this is because people every bit incomes rise and people spend more they will pay more income tax and VAT. This is beneficial because the authorities tin use this increased revenues to reduce the level of government borrowing and/or spend more on public services and investment in the state infrastructure. This investment in public services tin help improve the long-term functioning of the economy. For example, better infrastructure enables a lower cost of trade. Therefore, growth tin can cause a virtuous bike of college investment leading to higher growth – which enables more investment.

Lower unemployment. Higher economical growth will as well lead to an increase in need for labour as firms will exist producing more than. Therefore unemployment will fall, this has various advantages such as lower government spending on benefits and less social issues. If the economic system is in recession, then increasing the rate of economic growth volition be an of import step in reducing unemployment.

The rise in unemployment in 2008/09 was due to negative economic growth.

Costs of economic growth

However economic growth has diverse costs.

Possible inflation. Firstly if economic growth is unsustainable and is higher than the long-run trend rate inflation is likely to occur.

Furthermore, this temporary boom in output is unlikely to continue and may be followed by an economic downturn or recession. Thus, it tin exist very damaging to increase the charge per unit of economic growth above the sustainable rate. This boom and bosom cycle happened in the Great britain in the late 1980s and early on 1990s.

Electric current business relationship deficit. As well, an increase in economic growth could lead to a residuum of payments problem. If increased consumer spending, similar in the United kingdom of great britain and northern ireland, causes the growth and so in that location will be an increase in imports. Is imports rise faster than exports there will be a arrears. All the same, growth could be export-led east.g. Nihon's growth in the 1960s and 70s and China currently.

• However, if growth is increased by increasing the productive capacity and increasing the long run trend charge per unit then inflation will non occur and the growth will be sustainable.

However, fifty-fifty an increment in the long run trend rate can have undesirable effects. In some cases, economical growth can have unintended costs to living standards. This includes

Environmental costs. Higher output volition lead to increased pollution and congestion which tin reduce living standards e.g. increase in breathing problems, time wasted in traffic jams due east.t.c. China's break-neck menstruation of economical growth has led to increased pollution and congestion levels. Besides, growth volition lead to the consumption of not-renewable resources which may place costs on future generations.

China'due south economic growth has led to rise in CO2 emissions per capita.

• However, higher economic growth may encourage governments and consumers to spend more of their disposable income on protecting the surroundings. The poorest countries oft have bad pollution because they cannot beget to reduce it. Economic growth without pollution is possible – if care is taken to concentrate on more environmentally friendly methods.

ii. Income inequality. Economic growth often leads to increased inequality because growth benefits the richer almost because they ain assets and have the best-paid jobs. Thomas Piketty observed that, without sufficient policies of redistribution, the wealthy tend to increase their wealth at a faster rate than economic growth – because they can reinvest their dividends.

• However, equally economic growth can reduce relative poverty and inequality. Higher growth tends to enable governments to be able to afford welfare states and offer a minimum level of production. Economical growth from 1900 to 1970 helped reduce levels of inequality in the US and Europe.

iii. Social costs of economic growth. If society is geared towards economic growth and maximising consumption it could lead to a decline in quality of life.

• Maximising hours worked. We tin can increment economic growth past making people work longer hours, but they will then miss out on the possibility of leisure time. (However, on the other hand, economic growth and college productivity, in theory, enables people to work less.
• Monetary values. A society geared towards maximising GDP and consumption may prioritise income and wealth over promoting the public skilful. For case, edifice new power found which has ecology costs.
• Disease of affluence. With college growth, we have called a richer (higher fat, sugar) diet, which causes problems such every bit diabetes and middle illness. Likewise, the increased levels of pollution arising from growth contribute to health problems such every bit asthma.

Decision

Economic growth has many obvious benefits all the same the desirability depends upon many factors such every bit; the nature of growth, is the growth sustainable? Does it harm the environment? Nonetheless, rather than trying to stop economic growth, it is better to concentrate on improving the nature of economic growth and being aware that many factors decide the desirability of economic growth.

Related

• How to increase economic growth

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Source: https://www.economicshelp.org/macroeconomics/macroessays/evaluate-benefits-growth/

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