CIE AS SAMPLE ESSAYS

Assess whether economic growth is always desirable for an economy. [12]

Economic growth refers to the increase in a country’s output of goods and services over time, measured by the rise in real Gross Domestic Product (GDP).

As an economy grows, it can lead to higher per capita incomes, which can improve the standard of living for citizens. Increased income levels mean individuals can afford better goods and services, such as healthcare, education, and housing. This can contribute to improvements in life expectancy and overall well-being.

Economic growth typically leads to increased demand for goods and services, encouraging businesses to expand production. This expansion often requires more labor, reducing unemployment rates. Lower unemployment can have a positive impact on social stability and reduce the burden on government welfare programs.

With economic growth, the government can collect more revenue through taxes on income, sales, and corporate profits. This additional revenue can be used to fund public services such as infrastructure, education, and healthcare, thus further supporting economic development. A healthier fiscal position can also allow the government to invest in future growth.

Rapid economic growth can lead to demand-pull inflation, where demand for goods and services exceeds supply. This can cause prices to rise, eroding the purchasing power of households, especially those on fixed incomes. If inflation is not controlled, it can lead to uncertainty in the economy and reduce the benefits of growth.

Economic growth does not always benefit all segments of society equally. In some cases, the gains from growth may be concentrated among wealthier individuals or specific sectors, leading to increased income inequality. Rising inequality can create social tensions and undermine the long-term sustainability of growth if large segments of the population feel left behind.

Whether economic growth is desirable depends on the context and how it is managed. In developing economies, where poverty levels are high, economic growth is often critical to improving living standards and reducing unemployment. For these economies, the benefits of growth, such as higher incomes and better infrastructure, may outweigh the associated costs. However, in high-income economies, where basic needs are already met, the focus may shift toward sustainable and inclusive growth.

In conclusion, growth is not inherently good or bad; its desirability depends on the specific needs of an economy and how effectively the government manages the associated risks. For growth to be genuinely beneficial, it should be sustainable, inclusive, and balanced, ensuring that the gains are distributed fairly and that the environment is protected for future generations.