Discuss the extent to which economic growth may benefit the economy. (18)
Economics growth is, it the short run an increase in real GDP and in the long run an increase in the productive capacity of an economy (the maximum output that the economy can produce). GDP stands for Gross Domestic Product which is the country’s production of goods and services valued at market price in a given time period. Real GDP is when these figures are corrected for inflation using a base year (The UK uses 2003 as its base year). It can be measured in three different ways; the output measure is the value of the goods and services produced by all sectors of the economy; agriculture, manufacturing, energy, construction, the service sector and government. The expenditure measure is the value of the goods and services purchased by households and by government, investment in machinery and buildings. It also includes the value of exports minus imports and finally the income method is the value of the income generated mostly in terms of profits and wages. Economic growth is often a result of low unemployment, which has an effect on the components of aggregate demand in that consumption will rise as when more people have a job, more people have more disposable income, savings and investment rise and with this productivity rises too. Long-term economic growth will arise from a continuous percentage increase in real GDP however it may not always be sustainable.
Economic growth can benefit the economy in that with it often comes lower rates of unemployment. A fall in unemployment would arise as a result of expansion and development so more workers are needed. Low unemployment as a result of economic growth makes it desirable in that if less people are unemployed, less people will be claiming unemployment benefits and the government will be able to reallocate the money and spend it on other things like health care or education which will in turn raise the standard of living....
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