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COSTS AND BENEFITS OF ECONOMIC GROWTH - Coggle Diagram
COSTS AND BENEFITS OF ECONOMIC GROWTH
BENEFITS
Improved living standards
Growth is an important avenue through which better
living standards and lower rates of absolute poverty can be achieved
Greater availability of goods and services
More job opportunities
Growth stimulates higher employment oppotunities and incomes
increases sales and profit
The accelerator effect of growth on capital investment
Rising aggregate demand (AD) and output encourages
investment in capital machinery which increases work productivity
Potential environmental benefits
richer countries have more resources available to invest
in cleaner technologies
Increasing tax revenues for govenments
it can be used to invest in better infrastructure like better roads, schools, healthcare, public services, etc
COSTS
inflation risk
if demand grows faster than long run productive potential, it is highly likely for demand-pull and cost-push inflation to occur
this can put pressure on interest rates and businesses/firms will lose competitiveness
environmental hazard
fast growth can lead to negative externalities
Negative externalities such as: increased noise and air pollution and road congestion.
increase in unemployment
businesses/firms may replace workers with machines
Scarce resources
economic growth may depend on scarce resources at a faster rate
Resources such as coal,oil, metals, etc
Only capital goods
economic growth may be dependent on production of capital goods at the expense of consumer goods
Income inequality
growth benefits the richer most because they often have better jobs
BY: Hyojin & Tiara