Economic Growth

• Economic growth:

  • Economic growth occurs when, over time, an economy expands its capacity to produce goods and services, this is measured by using the percentage change in GDP per annum
• Why is economic growth a macroeconomic objective?

  • Economic growth is a macroeconomic objective as higher real GDP means more wants are satisfied and the population can benefit from higher living standards.
• Why is economic growth a macroeconomic objective?

  • However there have been increasing concerns about the damage that decades of economic growth have inflicted on the environment. Some economists argue that continued growth may not increase people’s welfare and other ways of measuring the changes in the standard of living of a country’s inhabitants should be used.
• Possible implications on focusing on Economic Growth:

  If a government seeks to achieve higher rates of economic growth in the short term by boosting its own spending and cutting taxes, this might increase the rate of inflation as this will result in a scarcity of resources.
• Possible implications on focusing on Economic Growth:

  As an economy grows and reaches its maximum production levels, it requires further resources and these can become scarce, for example, skilled labour, as a result the cost of these resources can be expected to rise and therefore businesses will incur higher costs on buying these resources resulting in a deficit of the country's balanced balance of payments due to an increase in the cost of imports.