rise in the UK’s economy

The growth of the economy of a country incurs costs while balancing the demand and supply market. An increase in the economic growth rate of a country is likely to cause inflation in prices. A rise in the UK’s economy of over 4% led to an increase of over 9% in inflation (Bronfenbrenner, 1953). During a boom in the economy of a country, the rate of consumption of goods in the market tends to exceed the total supply of goods due to high incomes experienced in earnings and wages. When the rate of demand rises spontaneously, the supply of goods is likely to fall below market levels (Steven, et al., 2004). Therefore, merchants raise the price of goods to obtain a balance in demand and supply. Inflation further leads to lowering the purchasing power of a country’s currency, therefore depreciating the currency.

Figure 1: Inflation Demand Supply Curve

As the economy experiences rapid growth, product consumption increases as well as the productivity of the country. As the rate of production and consumption increases, the rate of accumulation of waste in the environment also increases (Agnolucci et al., 2017). Pollution and poor waste disposal and management may occur from the production processes in industries. Uncontrolled waste disposal may lead to other environment-related problems such as health problems. The increased rate of production of goods to meet the high rate of demand in the market increases the rate at which unrenewable resources are extracted from the environment, such as energy and other natural resources.

This may lead to depletion of resources as raw materials in the long-run effects (Steven, et al., 2004). An increase in economic growth leads to the country, spending much capital on goods from other economies, in forms of imports. An increase in the value of imports in the country’s current account depreciates the account. More imports into a country widen the deficit in the current account (Agnolucci et al., 2017). These effects may lead to the country suffering low levels of assets in the foreign market. A country with a deficit current account is unable to lend more to foreign markets, indicating that the market could face a recession in the near future if it is uncontrolled.

A rapid economic growth characterized by price inflations is also likely to experience a rise in taxes. However, the economic development may only benefit apart if the population in the country and end-up burdening a more significant part of the population, especially in third world countries. A rise in the price of commodity and rent may only benefit property owners while weighing down on the unemployed tenants (Steven, et al., 2004). A rise in taxes might also benefit a few that work on government contracts but end up pressing on the local citizens of the country. An increase in the economy of a country leads to more consumers spending more on luxuries, therefore raising their standards of living. Exceptional living standards may lead to an increase in infections and diseases from the consumption of excessive luxuries such as alcohol and tobacco. Increased cases of illnesses burden the healthcare systems of a country (Steven, et al., 2004). Other problems that could result from a rise in living standards are pollution levels and road accidents, mainly due to many citizens possessing cars. Social insecurity, such as theft, is also projected to increase in a rapidly growing economy due to the increase in the number of goods purchased by citizens.

However, these costs are mainly associated with unstable economic growth, mostly experienced in developing countries. Balanced growth leads to more benefits than costs since inflation is unlikely to occur.

References

Agnolucci, P., Flachenecker, F., & Söderberg, M. (2017). The causal impact of economic growth on material used in Europe. Journal Of Environmental Economics And Policy, 6(4), 415-432. https://doi.org/10.1080/21606544.2017.1325780

Bronfenbrenner, M. (1953). I: The High Cost of Economic Development. Land Economics, 29(2), 93. https://doi.org/10.2307/3144402

Steven, . B., Stephen, D. & Harvey , C., 2004. Estimating Costs and Benefits of Economic Growth: A CGE-Based Study of Tax Incentives in a Rapidly Growing Region. Journal of Regional Analysis and Policy, 34(2).