Tuesday, 2 August 2011

Economic Growth (Macroeconomics)

Economic growth is when an economies Real GDP increases, so a sustained increase in real output and income in a period of time. It can be shown by an outward shift on a PPF curve or a rightward shift of AD on an AD/AS diagram, providing there's enough spare capacity in the economy.

Economic growth is caused by anything that increases AD, providing there is enough spare capacity available. What also causes it is increases in the efficiency in using factors of production. What can cause this is improvement in education and training, improving labour mobility, increasing competition and obtaining more factors of production.

The benefits of economic growth include:

  • Increased output, employment and income.
  • Improved standard of living.
  • Improved health, education and public services.

However, there also costs of economic growth. These are:
  • Degrading of the environment by using up resources and creating waste.
  • Increased stress and a faster pace of life.
  • Increased inequality, difference between rich and poor.
That's the basics of economic growth, you can come to your own conclusion about whether it is desirable in large quantities etc. Thanks.

No comments:

Post a Comment