12 Nov Why is economic growth important to an economy?
Why is economic growth important to an economy?
The greatest benefit of economic growth is a rise in the living standards. This is provided economic growth exceeds population growth, real GDP per capita will rise a higher level of consumption of goods and services.
Rapid economic growth rate makes it easier to redistribute income to the poor (lower income group). When there is economic growth income rises, the government can redistribute income from the upper income group to the lower income group without the need to raise tax rates, i.e. without penalising the
high income earners the rich pays more taxes. In addition, economic growth firms’ profit level rises pays more corporate tax a positive effect on government finances boosting tax revenues and providing the government with extra funds to spent on programmes to alleviate poverty and close the income gap between the rich and poor.
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