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9 Economic growth - Coggle Diagram
9 Economic growth
Sources of
Actual
Potential
Effects of
Advantages
Households
Rising material SOL
Rising employment and wages
Firms
Increased profits
Increased expenditure on R&D
Government
Improvement in budget
More inclusive growth
Sustained economic growth
Disadvantages
Inflation
Worsening of material SOL
Environmental degradation
Increased income inequality
Non-inclusive growth
Increased unemployment of low-skilled labour
Slow growth and recession
Addressing through demand-side policies
Expansionary fiscal policy
Raising govt expenditure
Reducing tax rates
Limitations
Size of multiplier
Possibility of crowding-out effect
Time lag
Government's budget deficit
Monetary policy
Centered on i/r
Limitations
Countries who are interest rate takers e.g. SG cannot undertake MP
Size of multiplier
Interest elasticity of investments and consumption
Liquidity trap
Quantitative easing
Limitations
Addressing through supply-side policies
Sustained economic growth