Consequences of a High Rate of Economic Growth

Topics: Poverty, Economics, Inflation Pages: 2 (394 words) Published: June 12, 2008
Having economic growth can be very advantages for a country because it decreases the level of unemployment and gives the majority of the population to enjoy a better standard of living. But, there are some drawbacks when it comes to a high rate of economic growth.

Inflation Risk :
If there’s a high rate of economic growth, there could be a negative impact on the economy because it will lead to inflation.

If there is a high growth rate with a high inflation, the growth rate can hardly be counted. It will result in a rise in interest rates which will also reduce productivity within the country. When this occurs, there will be a Balance of Payment deficit because imports will be greater than exports.

Inequalities of Wealth and Income Distribution :
When an economic growth occurs, there is a group of people who are taking advantage of it and another group of people who are having bad impacts from it. In other words we can say that the rich people gets richer and richer but the people who are getting a small amount of income are getting poorer and poorer. Economic growth is very advantageous for people who are doing businesses because, as the prices of goods and services rise, they have the opportunity to get high profits. But when it comes to the people who are employed, the rise in prices of goods and services will ultimately become a heavy burden for them and their families. So basically, economic growth creates a huge gap between the rich and the poor.

Environment :
The environment will be caused with negative externalities i.e. noise, land, water and air pollution and road congestion, “increased consumption of de-merit goods” etc., when there is a rise in the rate of production of goods and services and consumption. Nowadays, this situation can be seen in countries like China because of their high growth rate. These could result in having a negative effect on the people’s day-to-day lives and also hold back the rate of growth of a country. When...
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