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Economic Growth Essay

949 words - 4 pages

Economic Growth

Question 1

GDP in 2010 €2500bn
% Change in 2011 0.7%

€2,500bn x 0.7 = €17.5bn

China has consistently the highest growth rates in GDP year on year and of the counties listed appears to be the main driver of growth as the other economies pattern of growth remains flat. For example the estimated growth in 2013 for China is 8.3% whereas the other economies are predicted to grow between 0.3% and 2%.

Question 2

Fiscal drag is a concept where inflation and earnings growth may push more taxpayers into higher tax brackets. Therefore fiscal drag has the effect of raising government tax revenue without explicitly raising tax rates.

In 2014, fiscal drag has ...view middle of the document...

Question 4

Economic growth is defined as an increase in the output that an economy produces over a period of time, the minimum being two consecutive quarters. The second meaning of economic growth is an increase in what an economy can produce if it is using all its scarce resources. An increase in an economy’s productive potential can be shown by an outward shift in the economy’s production possibility frontier (PPF). The simplest way to show economic growth is to bundle all goods into two basic categories, consumer and capital goods. An outward shift of a PPF means that an economy has increased its capacity to produce.  

Investment in new technology has seen the development of machines to help production and as a result labour specialisation. This can improve productive capacity and ultimately allow for people to have more free time away from production. Those advances in technology then cross over into leisure activities such as foreign travel and games consoles. Further economic growth will help to persuade consumers that the time is right to make major purchases; as confidence increases they are prepared to borrow to purchase those items such as motor cars and electronic goods. Rising demand and more efficient output then encourages further investment.

Sustained GDP growth then boosts tax revenues and provides the government with the money to improve public services such as education and healthcare.

The impact of economic growth does not confine itself to benefiting only the individual but can have a wider social benefit such as protecting the environment through low-carbon investment, innovation and research and development, resulting in more efficient production processes consuming less scare resources. That growth also allows people the time and resource to consider ethical consumerism e.g. Fairtrade and corporate social responsibility improving living standards in...

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