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Discuss the Extent to Which Economic Growth May Benefit an Economy. (18)

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Discuss the extent to which economic growth may benefit an economy. (18)
Economic growth is an increase in the output that an economy produces over time, for the minimum of two consecutive quarters. Economic growth can benefit an economy in a number of ways. Firstly, higher average incomes, this allows consumers to enjoy more goods and services and enjoy better standards of living. This in turn could lead to the ‘Trickle Down’ effect, those who are the highest income earners spending their disposable income on goods and services in the economy, those lower income earners could benefit from this as that money gets filtered through all sections of the economy. Therefore, many people in the economy will benefit from an increase in average income even if it is only the higher income earner who actually receive the increase. Secondly, economic growth can benefit an economy through lower unemployment, as the economy has an increase in real GDP and positive economic growth, firms will be producing more as they will be receiving a greater demand for the good and services they produce. As a result, firms will need to employ more workers in order to meet the new levels of demand. As labour is derived demand, this means that when the demand for goods and services increases, so does the demand for labour, this results in an increase in employment and reducing poverty. Another way in which economic growth can benefit an economy is lower government borrowing. Economic growth generates higher tax revenues and therefore less of a need for the government to spend money on benefits such as Job Seekers Allowance. Therefore economic growth helps reduce government borrowing and allows them to spend tax revenue on improving public services that benefit the whole economy like education and health care. Lastly, economic growth can stimulate and encourage investment as other firms and…...

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