Benefits and Costs of Economic Growth Essay

638 Words 3 Pages
Economic growth is defined as the sustained increase in real GDP or GNP per capita over time. Economic growth is desirable for an economy as it increases its real national income and standards of living for its people in general. Although it is desirable, economic growth does have its benefits and costs.

One benefit would be increased levels of consumption. Provided economic growth outstrips population growth, it will lead to higher real income per head. This can lead to higher levels of consumption of goods and services. With economic growth there will be improvement in business expectations, leading to increase in investment. Firms replace worn-out/ obsolete capital or invest in new capital. There will also be expansion of demand,
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Firstly it could result in reduced current consumption. To achieve faster growth, firms will probably need to invest more. This will require financing. The finance can come from higher saving, higher retained profits or higher taxes. Either way, there must be a cut in consumption. In the short run, therefore, higher growth leads to less consumption, not more.

Next, growth involves changes in production: both in terms of the goods produced and in terms of the techniques used and the skills required, the more rapid the rate of growth, the more rapid the rate of change. People may find that their skills are no longer relevant. Their jobs may be replaced by machines. People may thus find themselves unemployed, or forced to take low-paid, unskilled work.

A richer society may be more concerned for the environment, but it is also likely to do more damage to it. The higher the level of consumption, the higher is likely to be the level of pollution and waste. What is more, many of the environmental costs are likely to be underestimated due to lack of scientific knowledge. Acid rain and the depletion of the ozone layer have been 2 examples.

Lastly, it could deplete our non-renewable resources. If growth involves using a greater amount of resources, rather than using the same amount of resources more efficiently, certain non-renewable

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