Costs of Economic Growth
1. Inflation risk
If the economy grows too quickly there is the danger of inflation as demand races ahead of the ability of the economy to supply goods and services. Producer then take advantage of this by raising prices for consumers. An outward shift in Aggregate demand can lead to an increase in the general price level.
2. Inequality
Not all of the benefits of economic growth are evenly distributed. We can see a rise in national output but also growing income and wealth inequality in society. There will also be regional differences in the distribution of rising income and spending.
3. Externalities
Fast growth can create negative externalities (increased pollution and congestion) which damages overall social welfare. Growth that damages the environment can have a long term negative effect on the quality of life and the sustainable rate of growth for an economy.
posted by yuhu @ 9:06 AM
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