CLASSICAL LONG RUN POLICY MODEL
1. 1- answer to the questions below: (Min 250 words) No quoting Answer based on knowledge of the topic
Have the poor benefited more or less from economic growth than the rich?
2- Make constructive comment on each Response below: (betw 100-125words each)
Response 1: I think the short and simple answer to this question would be that economic growth will benefit everybody involved. This is because with the as the economy grows, there are more and more opportunities for people to increase productivity. For example, economic development leads to job creation, which leads to a higher employment rate, which leads to more financially stable individuals, which then leads to capital formation, and a overall rise for the countries GDP. With the growth of the economy, it aids both the needy and less fortunate people as well as the rich and wealthy people in rising above their current status. However, on the other hand, economic development is a vague concept which does not specifically indicate who gains less and who gains more. Personally, I think it boils down to who will take advantage of the opportunities which present themselves, and that solely depends on the given individual. The magnitude of benefits is measured by income allocation, racial disparity, and educational disparities. Wealth distribution, economic disparity, and socioeconomic inequalities are used to determine the size of the gains. The advantages are expressed in percentages, so the wealthy would get more rewards in absolute terms as their wealth grows in absolute terms. Overall, economic growth results in the production of jobs, the formation of wealth, and an increase in GDP. It helps both the poor and the rich rise above their present circumstances. As we learned from the Donut model, not all economic growth is good for the environment and economy, sometimes downsizing is what will benefit us the most, but not always.
Response 2: Economic growth is characterized as an increase in the quantity of products and services generated in a country in one year. It is undebatable that economic growth changes the lives of all people regardless of their class, but the change is different within the classes. Economic growth essentially results in better living conditions such as higher average wages and the opportunity to dedicate more money to healthcare and education. The lives and well-being of poor people will considerably improve as well as inequality between the classes may reduce. If the country experiences economic growth, it means that the potential output, which is the maximum amount of products and services that can be produced, will rise, so there will be a demand for new jobs and employment. People who lived in poverty before the economic growth will have a chance to find jobs because the economy will need more workers to produce at its maximum. When poor people have more funds to spend, their purchasing power may increase since now they can afford to buy more goods and services. Economic growth affects rich people differently from poor since rich people already have very high living standards, so they are concerned about increasing their wealth even more. Economic growth will increase the demand for new undertakings or expanding the existing businesses, it is the right time for rich people to make new investments. Increased investment expands the potential for future economic development, resulting in a successful chain of economic development. However, economic growth can still create uneven wealth distribution, which reveals that the poor do not benefit as much as the rich from economic growth.
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