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The Impacts of Economic Growth

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The Impacts of Economic Growth

Economic growth is the increase in the amount of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.

There are many positives and negatives with economic growth. Economic growth improves standard of living through sustained GDP growth, it improves tax revenues and provides the government with more money to spend on healthcare, education etc. Growth boosts business profits, a stronger economy increases consumer confidence therefore allowing people to purchase luxuries and once again improve their standard of living. Economic Growth will also increase employment, as growth increases as do business profits, therefore companies have more available finances to be able to pay wages and therefore levels of employment increase. Economic Growth can help protect the environment, as business profits increase, companies have more finance and can therefore invest in carbon investment, innovation and research and development to reduce the amount of harmful substances released during the production stages, therefore reducing their effect on the environment. On the other hand, economic growth poses as a threat of inflation risk. Increase in demand may be more than available supply and will therefore cause prices to rise, so consumer confidence decreases along with standard of living and business profits. Economic growth can have a negative effect on working hours, a fast-growing economy may increase demand for the demand for the hours people work, and therefore this may upset the balance between work and social life. Economic growth can have environmental externalities, fast growth can create negative externalities for example increased noise pollution in cities, air pollution due to increased traffic congestion and finally and large increases in industrial waste. This therefore increases global warming and affect climate change. In conclusion, economic growth encourages consumer and government spending whilst causing negative effects with the overwhelming natur of economic growth.

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