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Pros and Cons of Economic Growth

The actual national output(GDP) annual percentage change serves as an indicator of growth. Economic growth is generally seen as a long-term idea by economists. According to them, growth is the continuous rise in a nation’s ability and capacity for production. In this article, we will discuss the pros and cons of economic growth to better understand this topic.

Benefits or Advantages of Economic Growth

Increased consumption

A greater GDP suggests that the economy is creating more goods and services, which in turn allows customers to enjoy more of them. Growth will help society if consumption and human welfare are related. Greater consumption will contribute to a decrease in the incidence of absolute poverty, which is defined as the failure of an individual to meet their fundamental needs.

Economic dividend

Higher tax revenues and lower government spending on welfare programs linked to unemployment and poverty result from stronger economic growth. e.g., healthcare, education, pension.

Effect on Employment

Maintaining growth promotes employment and reduces unemployment rates, both of which reduce disparities in income.

Reduced unemployment

As businesses produce more, higher economic growth will also result in a rise in the demand for labor. As a result, there will be a decrease in unemployment, which has several benefits like decreased social problems and less government spending on benefits. Raising the rate of economic growth will be essential for lowering unemployment if the economy is in recession.

Increased funding for public services

A higher GDP will allow the government to collect more taxes because rising incomes and increased spending will result in more income tax and VAT payments from citizens. This is advantageous since the government can utilize the higher revenue to either spend more on public services and infrastructure improvements across the nation or lower the amount of government borrowing. This expenditure on public service may contribute to the economy’s long-term growth. Growth can therefore start a positive feedback loop whereby increased investment fuels worth which in turn encourages even more investment.

Cons or Disadvantages of Economic Growth

Cost of the environment

Increased output will result in more pollution and traffic, which can lower living standards by increasing asthma, wasting time in traffic jams, and other issues. China’s rapid economic expansion has resulted in higher levels of pollution and traffic. Furthermore, growth will result in the use of nonrenewable resources, which could be expensive for coming generations.

Inflation problem

The most significant disadvantage of economic growth is that it may cause inflation. As people’s income rises, they demand more goods and services, and if the economy is unable to provide sufficient goods and services at a given price, dam and pull inflation occurs which has its own set of effects.

Wealth Gap

Economic growth does not imply that all people in the country will benefit from it. Rather it creates a large divide between rich and poor because if the government does not pay proper attention, rich people will become riches, and poor people will become poorer, resulting in a wealth gap, which we all know has its own set of problems. To put it simply economic growth together with government policy, is one of the causes of an expansion in the wealth gap.

Thank you for reading this article. If you have any queries regarding our article on the Pros and Cons of Economic Growth, then do leave a comment in the comment section below.

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Jay Solanki > Expert Content Writer
Jay Solanki > Expert Content Writer
Jay Solanki is an expert writer with 8+ years of experience as a content writer. They specialize in making complex topics like insurance and technology easy to understand. Jay has written over thousands of articles to help people become confident about technology knowledge. Prior to joining Way2benefits’s editorial team in 2020, Jay worked as a Digital Marketing Expert and user experience researcher, producing content for US based firms.