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12263313
Consequences of EG
Description
Mind Map on Consequences of EG, created by Jia Jun Neo on 14/02/2018.
Mind Map by
Jia Jun Neo
, updated more than 1 year ago
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Created by
Jia Jun Neo
over 6 years ago
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Resource summary
Consequences of EG
Positive
1. Higher MSOL
↑ Y per capita
↑ Purchasing Power
↑ Spending on normal gds
Fall in inventories
↑ DD for FOPs
↑ Derived DD for labour , ↑ employment
↑ MSOL
↑ MSOL
Assuming pop growth > GDP growth
2. Higher Tax Revenue for govt
Increased ability to spend on economy for future developments
E.g. Increased provision of merit goods such as healthcare
3. Increased I (including FDIs)
EG signals rising purchasing power of citizens
Increased expected profitability of I
Fall in direct investments abroad
Increased FDI
Increased PG and AG
2. Reduced Unemployment
Negative
4. Worsening BOP
Increased purchasing power may lead to increased import expenditure
Worsens BOT under CA
e.g. Locals travel to foreign ctys for holidays more frequently , purchasing more foreign gds
3. High Inflation
If economy operating near or at vertical range of AS
Erodes purchasing power
Undermines benefits of EG
2. Exacerbates y-inequality
Increased y may be experienced predominantly by high-y earners
Increased unhappiness among citizens
Consequences may be severe
Majority doesn't experience ↑ MSOL
1. Non MSOL may be compromised
E.g. growth leading to increased air pollution --> worsens air quality
Outcome depends on...
1. State of economy
Determines whether growth is inflationary
2. Extent of govt policies
a. To promote inclusive growth
Curbs worsening y-inequality
b. To achieve sustainable growth
Curbs deterioration of environment
Increase in RGDP
Media attachments
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