Business Questions and Answers

Start Your Free Trial

Why does economic growth or increases in real GDP such a good thing? Is it because unemployment generally goes down when GDP rises and spending and incomes rise?

Expert Answers info

Abbey Hayes eNotes educator | Certified Educator

calendarEducator since 2016

write102 answers

starTop subjects are History, Law and Politics, and Literature

A growing economy, as measured by increasing GDP, certainly helps lower unemployment, and historically at least, it also tends to increase wages as more positions become open and as already employed workers feel emboldened to seek better paying jobs or to negotiate for higher wages and better benefits. That having been said, with increasing automation, the loss of influence of labor unions, and the practice of outsourcing jobs to countries where wages are lower, GDP has become partially decoupled from wage growth and thus income growth.

In other words, it used to be that when GDP growth was strong, wages increased pretty much proportionally. That is no longer the case, particularly for workers without college educations or highly sought after technical skills. So while growth in the economy as a whole, as measured by GDP, is undoubtably a positive development, the benefits of expanding GDP tend to help those higher up the socio-economic strata, particularly those with retirement...

(The entire section contains 2 answers and 614 words.)

Unlock This Answer Now


check Approved by eNotes Editorial

pohnpei397 eNotes educator | Certified Educator

calendarEducator since 2009

write35,413 answers

starTop subjects are History, Literature, and Social Sciences

check Approved by eNotes Editorial


krishna-agrawala | Student

Growth in an economic or increase in real GDP means that the combined value of the products and services generated in the economy and available to the people for consumption or for increase in wealth through export has increased. In other means that people in generally are economically better off. This is why economic growth and increase in real GDP are considered good for economy.

Such growth is usually accompanied by increased employment. Which is also good for the economy, because it means that the increased prosperity of the economy is being shared more widely by the members of the economy. However, theoretically it is possible for economic growth to be accompanied by reduced employment.