ECO100Y5 Chapter Notes - Chapter 26: Diminishing Returns, Real Interest Rate, Demand Curve
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ECO100Y5 Full Course Notes
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Economic growth that raises average income tends to change the whole society"s consumption patterns, shifting away from tangible goods such as tvs and furniture and cars toward services such as vacations, restaurant meals, and financial services. Rapid growth rate makes alleviation of poverty and the reduction of income inequality easer to achieve politically. If existing income is to be redistributed through the government"s tax or spending policies, someone"s standard of living will actually have to be lowered. However, when there is economy growth and when some of the increment in income is redistributed (through active government policy), it is possible to reduce income inequalities while allowing all incomes to rise. Economic growth, which promises more g/s tomorrow, is achieved by consuming fewer goods today; this sacrifice of current consumption is an important cost of growth: social costs. The process of economic growth reduces machines absolete and also leaves the skills of some workers absolete.
