Economic growth measures how much the total output of goods and services in an economy increases over time. In Junior Cycle Business Studies, the examination tests your ability to explain how this growth impacts the economy, society, and the environment, and to justify why governments and businesses must promote sustainable development.
What is Economic Growth?
Economic growth is an increase in the quantity of goods and services produced in an economy over a period of time, usually one year.
- Official measure: Growth in Ireland is measured by Gross Domestic Product (GDP) or Gross National Product (GNP). GDP is the total value of all goods and services produced inside the country. GNP is the value produced by Irish-owned factors of production, whether at home or abroad. Either may be given as the official measure.
- Rate of economic growth: This is calculated as (increase in output ÷ original output) × 100.
Economic impacts of growth
- Positive: unemployment falls as expanding firms hire workers, so the government collects more tax (PAYE and VAT) and spends less on Jobseeker's payments.
- Positive: higher tax revenue allows the state to invest in public infrastructure or repay national debt.
- Negative: high demand can outstrip supply, driving up prices and causing inflation.
- Negative: fast growth can cause shortages in housing and place heavy strain on roads and public transport.
Measuring output alone does not show whether national wealth is shared fairly or whether the environment is protected.
Impacts of Economic Growth on Society
Society means the people, workers, and communities in an economy. Growth affects them in good and bad ways.
| Positive Social Impacts | Negative Social Impacts |
|---|---|
| Job creation: businesses hire extra staff, reducing unemployment and providing households with dependable wages. | Growing inequality: economic gains are rarely shared evenly, which widens the gap between high and low earners. |
| Higher standard of living: higher wages allow families to afford better food, healthcare, and education. | Housing costs and stress: high demand drives up house prices and rents, while firms push workers for longer hours. |
For example, if a medical device factory in Athlone expands, it creates local jobs and lifts household incomes, but rising local rents may squeeze young workers.
Impacts of Economic Growth on the Environment
Producing more goods puts direct pressure on the planet, but economic wealth also funds green solutions.
| Positive Environmental Impacts | Negative Environmental Impacts |
|---|---|
| Green investment: higher government revenues fund SEAI grants for home insulation, while profitable firms can buy energy-efficient machinery. | Resources used up: producing more goods uses up non-renewable resources such as oil, gas, and coal, which cannot be replaced. |
| Eco-friendly spending: families with higher incomes can afford electric vehicles and solar panels. | Pollution and climate change: factories emit waste and transport burns fuel, releasing greenhouse gases that drive global warming. |
For example, more goods being moved means more lorries on the road, so more greenhouse gases are released into the air. In Ireland, the Environmental Protection Agency (EPA) enforces environmental laws to limit industrial emissions and protect nature.
Justifying Sustainable Development
Sustainable development means development which meets the needs of the present without compromising the ability of future generations to meet their own needs. It requires sustainability: a process of balancing social, environmental, and economic systems for the well-being of individuals now and in the future.
| Pillar | Focus | Practical Action |
|---|---|---|
| Economic (Profit) | Financial health and employment | Running viable businesses without wasting resources |
| Social (People) | Fairness and community well-being | Providing safe working conditions, fair pay, and equal opportunities |
| Environmental (Planet) | Protecting natural systems | Cutting carbon emissions, minimising waste, and conserving wildlife habitats |
Reasons to justify sustainable development
- Protecting non-renewable resources ensures that future generations will have the raw materials and energy they need.
- Preventing environmental destruction lowers the risk and cost of severe flooding and storm damage to transport networks.
- Developing renewable wind and solar energy creates permanent local jobs while reducing carbon emissions.
- Irish programmes such as Origin Green, run by Bord Bia, help food and drink companies set targets to cut emissions and waste while keeping exports competitive.
Key terms
- Economic Growth
- An increase in the quantity of goods and services produced in an economy over a period of time, usually measured over a year.
- Gross Domestic Product (GDP)
- The total monetary value of all finished goods and services produced within a country over a specific time period.
- Gross National Product (GNP)
- The total market value of all goods and services produced by the permanent residents and businesses of a country, regardless of where production takes place.
- Sustainability
- A process of balancing the social, economic, and environmental systems that are in constant interaction for the well-being of individuals now and in the future.
- Sustainable Development
- Development which meets the needs of the present without compromising the ability of future generations to meet their own needs.
- Non-Renewable Resources
- Natural resources that exist in finite quantities and cannot be replaced once used up, such as coal, oil, and gas.
- Greenhouse Gases
- Gases such as carbon dioxide that trap heat in the atmosphere, released primarily by burning fossil fuels.
Check yourself
What is meant by the term 'economic growth'?
An increase in the quantity of goods and services produced in an economy over a period of time, usually measured over a year.
What are the three core pillars of sustainability?
The social, environmental, and economic pillars (people, planet, and profit).
State one positive economic benefit of economic growth for the government.
Tax revenues from PAYE and VAT rise, allowing the government to spend more on public services or pay down national debt.
Which Irish public body is responsible for enforcing environmental regulations?
The Environmental Protection Agency (EPA).
Give one reason why sustainable development must be promoted.
It preserves finite, non-renewable resources so that future generations can meet their own needs.