Tuesday, October 27, 2009

Consequences of economic growth for inflation, employment, unemployment, balance of payments and the government’s fiscal position

Inflation.

Positive economic growth would probably lead to decreasing in the inflation rate, on the other hand negative economic growth would probably lead to rising in inflation rate.

Employment

Positive economic growth - lead to increasing in production - increasing in the employment rate. Negative economic growth would lead to opposite changes in the employment rate.

Unemployment

Positive economic growth would lead to decreasing in unemployment rate, on the other hand negative economic growth would lead to increasing in unemployment rate.

Balance of payments

Positive economic growth increase the output of the country's economy, so export of the country would increase (in case with positive economic growth). This would lead  to increasing in balance of payments. During negative economic growth the output would decline, so there would be a demand for import. In this case the balance of payments (which include current account) would decrease.

The government fiscal position   

Positive economic growth would fortify the government fiscal position, in the other hand negative economic growth would have negative affect on the fiscal position (government dept, for instance)



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