Benefits & Costs of Economic Growth
- Economic growth is considered to be the main contributor to an improvement in the standards of living
- Due to the negative aspects of economic growth, there is much controversy about maintaining it as a central macroeconomic aim
- Instead, arguments for a focus on societal well-being are gaining traction
A Table Summarising the Benefits & Costs of Economic Growth
| Benefits of Economic Growth | Costs of Economic Growth |
| Increased incomes lead to better standards of living | Rising aggregate demand causes demand pull inflation; purchasing power of people on fixed incomes may fall |
| Decreased levels of absolute poverty | Lack of equity in the distribution of income - the rich may get richer and the poor poorer |
| Improvement in the quality/quantity of environmentally friendly technologies | Environmental damage caused by negative externalities of production |
| Higher sales revenue for firms and greater profits | Increased inflation can harm export sales |
| Increased investment by firms increases the potential output of the economy | Decreased export sales may lead to a delay in investment by firms |
| Reduced expenditure by governments on benefits | Increased income usually leads to greater consumption of demerit goods |
| Higher government tax revenue due to rising incomes and surging corporate profits | Greater output often requires more time from workers and can decrease leisure time and well-being |
| Increased employment resolves some of the negative social impacts of unemployment |
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