2.5.4 The Impact of Economic Growth

• Economic growth is considered to be the main contributor to an improvement in the standards of living
• Due to the negative aspects of economic growth, there is much controversy about maintaining it as a central macroeconomic aim
  • Instead, arguments for a focus on societal well-being are gaining traction
    
    

A Table Summarising the Benefits & Costs of Economic Growth

Benefits of Economic Growth	Costs of Economic Growth
Increased incomes lead to better standards of living	Rising aggregate demand causes demand pull inflation; purchasing power of people on fixed incomes may fall
Decreased levels of absolute poverty	Lack of equity in the distribution of income - the rich may get richer and the poor poorer
Improvement in the quality/quantity of environmentally friendly technologies	Environmental damage caused by negative externalities of production
Higher sales revenue for firms and greater profits	Increased inflation can harm export sales
Increased investment by firms increases the potential output of the economy	Decreased export sales may lead to a delay in investment by firms
Reduced expenditure by governments on benefits	Increased income usually leads to greater consumption of demerit goods
Higher government tax revenue due to rising incomes and surging corporate profits	Greater output often requires more time from workers and can decrease leisure time and well-being
Increased employment resolves some of the negative social impacts of unemployment