The impact of economic growth

• What is the benefit of economic growth on consumers?

  Consumers will generally have rising real incomes, and they will therefore be able to buy more goods and services, leading to higher living standards
• What is the benefit of economic growth on firms?

  With higher real incomes and increased demand for goods and services, firms will likely benefit from increased profits
• What is the benefit of economic growth on the government?

  The government will see an increase in tax revenue due to workers paying more income tax as their earnings rise, and firms paying more tax as their profits rise
• What is the benefit of economic growth on current and future living standards?

  Growth can help people out of poverty, and developing countries can gain foreign investment
• What is the cost of economic growth on consumers?

  If the rate of inflation from growth is higher than the increase in wages, than workers' real incomes will fall
• What is the cost of economic growth on firms?

  Rapid growth would cause an increase in demand for workers and raw materials, and this would cause in increase in wages, which would reduce firms' profits
• What is the cost of economic growth on the balance of trade in the economy?

  Higher incomes would mean the number of imports would increase and the number of exports would decrease, meaning the balance of trade would deteriorate
• What is the cost of economic growth on the environment in the economy?

  There is likely to be an increase in external costs such as pollution with more economic growth
• What is the cost of economic growth on current and future living standards?

  By increasing the rate of economic growth, an economy would have to forgo some consumption