Global Journal of Commerce & Management Perspective
Open Access

Economic Growth: Benefits and Disadvantages

Siman Bamforth^{* *}Correspondence: Siman Bamforth, Department of Commerce, University of Lincoln, Manchester, UK, Email:

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Description

The rise in the monetary worth of all the goods and services produced in the economy during a given period of time is referred to as economic growth. It is a particular kind of quantitative measurement that depicts the potential rise in the volume of commercial transactions occurring in the economy. By employing economic terminology like GDP and GNP, it may be quantified in terms of the rise in the total market value of new goods and services created. Economic development is the process by which a country's general population's health, welfare, and academic standing improve. It also relates to the increased output brought on by technological developments. It is the qualitative development in a nation's citizens' quality of life, and the Human Development Index is the best tool for measuring it (HDI). The creation of employment opportunities, technological advancements, living standards, living conditions, per capita income, quality of life, improvement in self-esteem requirements, GDP, industrial and infrastructural development, etc. are just a few of the factors that contribute to a nation's overall development.

Gross domestic product

The entire amount of goods and services generated over time in an economy is known as the gross domestic product (GDP). The national income, which accounts for the value of indirect taxes like VAT, is also measured using GDP. When GDP is divided by the population of a country, the result is GDP per capita. Real GDP and nominal GDP are two ways to describe GDP. While nominal GDP displays value without taking inflation into account, real GDP reflects value that has been adjusted for inflation. The methods used to calculate GDP, the advantages and disadvantages of GDP per capita, other approaches to gauge living standards, and a conclusion are all covered in the section that follows. There are three ways to calculate GDP. The first is the production approach, which determines the market value of the goods and services generated by the economy. The second strategy, known as the income approach, calculates the total amount of income made by everyone in the economy. Next, the expenditure approach, which bases its calculation on total spending on goods and services, is another way to gauge GDP. Gross Value Added (GVA), Gross National Product (GNP), and net national income can also be used to determine national income in addition to GDP (NNP). GNP is GDP + income from other countries minus income paid for foreign exchange, while GVA is the value when GDP is reduced by indirect taxes and includes subsidies.

Benefits of economic growth:

• Real GNI per capita growth, which raises people out of extreme poverty, is a key factor in development outcomes (e.g. rising HDI)

• An effect on employment - Consistent growth encourages employment and helps to cut unemployment rates, which in turn aids in reducing income disparity.

• Economic dividend: Stronger economic growth will increase tax collections and decrease government spending on welfare benefits connected to unemployment and poverty.

• Rising growth encourages new investment, such as in lowcarbon technology, as a result of the accelerator effect. Better growth might draw initiatives for foreign direct investment.

Disadvantages: The impact of inflation is the next major downside of economic growth. A rise in aggregate demand will result from economic expansion. If overall demand grows more quickly than overall supply grows, the economy will have an excess of demand but a lack of supply. Consequently, producers will often raise prices, and this condition is known as inflation. Overheating will happen when aggregate demand keeps rising but the economy is already operating at its maximum productive capacity. After that, there will be little to no rise in output and substantial inflation. Due to the UK's rapid economic expansion in the 1980s, inflation soared there by 10%. Increased inflation will lower people's purchasing power.