2.5.4 Impact of Economic Growth

• Why is efficiency important for economic growth?

  It allows more goods to be produced with fewer resources
• How can the government ensure efficiency in the market?

  By maintaining competition among producers
• What can hinder the market mechanism in low-income countries?

  Lack of protection of property rights
• How can civil wars or natural disasters affect economic growth?

  They can lead to negative growth by destroying assets
• Why is there a lack of efficiency in communist societies?

  The government is the only supplier
• What is actual growth?

  Percentage change in GDP over time
• What is potential growth?

  Change in productive potential over time
• What determines productive potential?

  Factors of production and technology development
• What does the PPF show?

  Potential output of the economy
• What indicates economic growth on the PPF?

  An outward shift of the PPF curve
• What are the benefits of economic growth for consumers?

  • Increased demand for housing
  • Higher share values
  • Improved productive efficiency
  • Potential for increased happiness
• What negative effects can economic growth have on consumers?

  Increased inequalities and inflation
• What are the benefits of economic growth for firms?

  • Increased investment opportunities
  • Improved business confidence
  • Enhanced technology and efficiency
  • Higher profits potential
• What challenges might firms face during economic growth?

  Markets for inferior goods may disappear
• What are the benefits of economic growth for the government?

  • Increased tax revenues
  • Improved public services
  • Potential budget surplus
• How does economic growth affect current and future living standards?

  It can lower poverty levels and increase jobs
• What are the potential negative impacts of economic growth on living standards?

  • Environmental exploitation
  • Increased inequalities
  • Resource depletion
• How can higher incomes affect environmental sustainability?

  Higher incomes can lead to more resource use
• What is a potential benefit of higher income households regarding population growth?

  They tend to have fewer children
• How might economic growth lead to increased inequalities?

  Rich may benefit more than the poor