Sustainable growth

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1. Define sustainable growth and write and explain using examples.

Sustainable growth is when countries aren’t using up all there non-renewable resources which is good as this can cause problems for the future generations, instead their using their renewable resources which allows future growth to continue. By using up all non- renewable resources it will cause future growth to end, will cause damage to the bio-diversity and may produce unsustainable pollutants, which is very bad for the economy.

Sustainable growth is when the economy increases output in a way which allows future output to continue and increase. This can be done by using more of the renewable resources such as paper, glass and aluminium which can be recycled so that it isn’t wasted allowing future growth to continue. Also to use less of non-renewable resources such as coal, oil which can not be recycled thereby it cause future growth to end.

2. Define “The multiplier effect” and explain how it works. Using practical examples of how the east and north London people and firms might benefit from a multiplier effect of the Channel Tunnel terminals.

The multiplier effect is when changes in expenditure to the economy produces a more extensive output upon total economic activity, allowing expenditure to continue feeding the economy. This is usually done from investment expenditure, government spending or exports.

For example if the government increases expenditure in education, this allows to increase expenditure to all other things relating to education as well, such as teacher salaries, new school buildings, school equipment, computer facilities etc. This causes a big boost to consumer spending and adds to more investment in expenditure. This is the first round effect. As salaries for teachers have increased they can now go off to spend more at bars, cafes etc. which increase demand for businesses, manufactures and many others and also continues to add to total expenditure. Since demand has increased businesses may need to employ more people (who also receive incomes) and may need to buy more raw materials. This is sets the second round of purchases. This leads to the third round where workers distributing the supply of coffee beans, or tea bags get more over time, which allows income to increase and expenditure to continue. All these rounds aren’t as successive as they look as there are leakages at each round, such as income tax, government VAT etc.

Firms will benefit from the multiplier effect of the Channel Tunnel terminals, because the Channel Tunnel links will allow people to travel to the destinations of Stratford and St Pancras or Hackney Marches, more people will be using them as people like efficiency. This means that firms close to each of these destinations such as caf� bars, newsagents and other businesses will get a boost in demand for goods and services. Which means that busy caf� bars may need to employ more people in order to increase output, which will also increase total expenditure as these new employed people will also be receiving incomes. Caf� bars may also need to buy more food products as demand for their service has increased. Then the people who are collecting or making the food products will also need to work harder, means getting overtime and an increased income, which means they will also have more money to spend.

3. Find a list of reasons to why the AS curve may shift outwards and argue how this would affect economic growth and the PPC.

The AS curve may shift outwards due to improvements in the expectations of business men as demand has increased business men may be wanting to expand their businesses. Changes in technology will cause the AS curve to shift as most jobs are being done automatically by computers so number of manual workers will decrease, which may cause unemployment to rise.

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