Exploring the Benefits of Economic Growth

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Growth can be defined as an increase in the value of goods and services produced in the country over a period of time. Growth is measured in the Real GDP (Gross Domestic Product), the health of an economy. Real GDP represents the total dollar value of goods and services produced over a specific time period. The Benefits of economic growth is, an increase in production so a wider range of goods and services available for the consumers. An increase in investment, increase in sales, revenues and profits. More jobs and more employment, increase production and investment. Higher income, increased production and more jobs increase household incomes and productivity for the producers. Increased savings, higher household incomes means an increase in savings. Higher tax revenue …show more content…

More investment by firms because the cost of borrowing increases so profits will decrease. Firms import of raw materials will cost more so importa payments rise which causes aggregate supply to shift to the left. This leads to employment increasing and higher income. This leads to more indirect tax for the government and less savings for households. So overall growth is significantly increased.

Inflation on Monetary Policy

Inflation is an increase in the general level of prices. If interest rates fall households are not willing to save as much because they get a lower return therefore consumption spending increases. When interest rates fall households will get a loan to buy items because the cost of borrowing is cheaper so they will spend on their wants. Overall this will increase aggregate demand which will cause demand pull inflation.

Demand pull inflation is where demand exceeds supply at current prices, so prices are pulled up by aggregate demand. This inflation causes to an increase in GDP because of higher consumption spending as shown in the

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