cost and benefits of economic growth

COST & BENEFITS OF ECONOMIC GROWTH

BY

NAZISH KHALID

AGENDA

Economic GrowthFactors of Economic GrowthBenefits of Economic GrowthCost of Economic Growth

ECONOMIC GROWTH Increase in total output of the

economy Measured by country’s GDP

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FACTORS OF ECONOMIC GROWTH

Human CapitalCapital GoodsNatural Resources Entrepreneurship

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FACTORS OF ECONOMIC GROWTH

Human Capital: It includes education, training, skills, and healthcare of the workers and the value that they bring to the country’s economy.

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FACTORS OF ECONOMIC GROWTH

Capital Goods: All of the goods that are produced in the country and then used to make other goods & services

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FACTORS OF ECONOMIC GROWTH

Natural Resources: All of the things found in or on

the earth; “gifts of nature”

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FACTORS OF ECONOMIC GROWTH

Entrepreneurship: People who take the risk to start and operate a business

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BENEFITS OF ECONOMIC GROWTHHigher employmentImproved business confidenceIncreased tax revenuesImproved living standardHigher investmentPotential environment benefitsImprovement in welfare

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Higher employment: With higher output firms tend to employ more workers creating more employment.

Improved business confidence: Economic growth normally has a positive impact on company profits & business confidence

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Improved living standard: Growth leads to better living standard and low poverty rates.

Increased tax revenues: Economic growth creates higher tax revenues providing the government with extra money to finance spending projects .

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Higher investment: Higher consumer demand leads to higher investment level.

Potential environment benefits: Richer countries have more resources available to invest in cleaner technologies.

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Improvement in welfare: Increase in economic

growth of a country leads to its ability to provide support for elderly, homeless and orphaned people.

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COST OF ECONOMIC GROWTH

Inflation Environmental concernsInequalities of income & wealthBalance of payment deficitLoss of land

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Inflation: If AD increases faster than AS then economic growth will be unsustainable. The output gap will narrow causing inflation to increase.

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Environmental concerns:Pollution Over farming reduces productivity of soilDeforestation Damage to eco-systemsNon-renewable resources(finite resources)

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Inequality of income & wealth: economic growth often rewards the strong but gives little to economically weak hence resulting in increased wealth gap.

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Balance of payment deficit: Increased Economic growth causes an increase in spending on imports therefore causing a deficit on the current account.

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Loss of land: Increased economic growth results in loss of available land

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CONCLUSION Economic growth is important for every country to cope with the developing world. But as much as benefits we receive from this growth there are the costs and circumstances which cannot be ignored.

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ANY QUESTION !!!

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