The term economic growth looks at the capacity for the economy to grow. The economy is measured via the use of real GDP which would take inflation into consideration. Economic growth is currently the government’s main aim and is a keen objective as they want the economy to grow at a rate which demand will no surpass the amount that is supplied. A strong increase in the economy’s growth in the UK could be down to various reasons such as an increase in technology which would increase output for a firm resulting in economic growth. Statistics have showed that the UK has expanded by 0.80 percent in the third quarter of 2013. This essay will evaluate the benefits of economic growth in the UK.
The diagram above shows the production possibility frontier (PPF) which shows the combination of goods and services which can be produced by the resources in the economy. Point A on the graph shows underutilisation within the economy; Point B shows that goods and services are being allocatively/productively efficient; and Point C is showing a point which is unattainable within the economy. The shift from PPF1 to PPF2 is economic growth as there has been an increase in the quantity which increases total potential output. The ways in which this could happen is due to factors such as the discovery of new raw materials or another factor being more sophisticated technology to increase the amount which is being produced by a particular firm.
One benefit of economic growth would be the fact that the rate of unemployment would reduce within the UK economy. The term unemployment means the amount of people who are not in work at a given period of time. It consists of working age who are actively seeking employment; it is measured using the claimant count and the labour force survey which is the most common within the UK and internationally. With a deduction in the unemployment it would mean that if more individuals are working, then a firm can actually become more productively efficient as the output would increase. If individuals are increasing and helping a firm to increase its output it could have social benefits such as factors like an increase in migration as individuals will see more into economy’s like the UK reap the benefits as they can be able to get a new breed of innovative workers especially if they have specialized skills to a fit new roles within the economy’s leading to an increase in economic growth ad their own consumer welfare. However, the idea of economic growth can be critiqued and said that the use of technology could actually cause unemployment as individuals will not be needed especially if machines can produce more leading to a higher output for a firm but could also mean that the labour turnover for firms will be especially high. We can also link this to magnitude as it may not have immediate effects, but happen over a long period of time within the UK economy. In addition, we can look at a macro objective and say that economic growth could lead to balance of payments problems. If consumer spending, like in the UK, causes the growth then there will be an increase on imports and if imports rise higher than exports there will be a deficit within the UK economy and also inflation.
Furthermore, another benefit of economic growth would be the fact that it would increase the living standard level of individuals within the UK economy. The term living standard is the level of wealth, comfort, material goods, and necessities available to a certain socio-economic class which is in a certain geographic area; factors such as income, poverty rate, GDP would also be taken into consideration. With standard of living increasing it means that consumers can actually buy the goods and services which they want. For example instead of buying only necessities, consumers will be able to afford luxury goods and buy more products like fine wine or even take more