Benefits of Economic Growth
                     BENEFITS OF ECONOMIC GROWTH
INTRODUCTION
Economic growth means an increase in 
real GDP – an increase in the value of 
national output, income and expenditure. 
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ECONOMIC GROWTH
Essentially the benefit of economic growth 
is higher living standards – higher real 
incomes and the ability to devote more 
resources to areas like health care and 
education.
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BENEFITS OF 
ECONOMIC 
GROWTH 
4
HIGHER AVERAGE 
INCOMES
Economic growth enables consumers to 
consume more goods and services and 
enjoy better standards of living. 
Economic growth during the Twentieth 
Century was a major factor in reducing 
absolute levels of poverty and enabling a 
rise in life expectancy.
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LOWER 
UNEMPLOYMENT
With higher output and positive economic 
growth, firms tend to employ more 
workers creating more employment.
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LOWER GOVERNMENT 
BORROWING
Economic growth creates higher tax 
revenues, and there is less need to spend 
money on benefits such as unemployment 
benefit. 
Therefore economic growth helps to 
reduce government borrowing. Economic 
growth also plays a role in reducing debt 
to GDP ratios.
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IMPROVED PUBLIC 
SERVICES
Higher economic growth leads to higher 
tax revenues and this enables the 
government can spend more on public 
services, such as health care and 
education etc. 
This can enable higher living standards, 
such as increased life expectancy, higher 
rates of literacy and a greater 
understanding of civic and political issues.
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MONEY CAN BE SPENT 
ON PROTECTING THE 
ENVIRONMENT
With higher economic growth a society can 
devote more resources to promoting 
recycling and the use of renewable 
resources. 
The Kuznets curve suggests that initially 
economic growth worsens the 
environment, but after a certain point of 
growth, the damage to the environment 
will fall. This theory is controversial. 
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INVESTMENT
Economic growth encourages firms to 
invest, in order to meet future demand. 
Higher investment increases the scope for 
future economic growth – creating a 
virtuous cycle of economic 
growth/investment.
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INCREASED 
RESEARCH AND 
DEVELOPMENT
High economic growth leads to increased 
profitability for firms, enabling more 
spending on research and development. 
This can lead to technological 
breakthroughs, such as improved medicine 
and greener technology.
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ECONOMIC 
DEVELOPMENT
The biggest factor for promoting economic 
development is sustained economic 
growth. 
Economic growth in south-east Asia over 
the past few decades has played a major 
role in reducing levels of poverty, 
increasing life expectancy and enabling 
more economic prosperity.
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