Respuesta :
Economic growth runs the risk of causing inflation.
This risk also is elevated by the fact that in order for economic growth to occur, savings must be sacrificed in the form of investment. When a person or organization invests in something, they forgo the money they had and can not use it in the hopes that it will be paid back to them with greater return. If this occurs, then growth occurs. If not, then the investment is lost.
This risk also is elevated by the fact that in order for economic growth to occur, savings must be sacrificed in the form of investment. When a person or organization invests in something, they forgo the money they had and can not use it in the hopes that it will be paid back to them with greater return. If this occurs, then growth occurs. If not, then the investment is lost.
The risk of the high inflation rate is the risk that economic growth requires. The higher level of economic growth rate requires a sacrifice as it raises the prices of goods and services in the economy.
Further explanation:
A trade-off between economic growth and inflation control: An economy faces a choice between economic growth and inflation control in the short run. If the government tries to boost the aggregate demand to raise the level of economic growth, it results in a higher inflation rate. This will impose a risk of higher inflation rates to the economy that wishes to raise economic growth.
The sacrifice required for economic growth: A higher level of economic growth requires a higher demand for goods and services. The higher aggregate demand raises the overall prices in the economy. This requires a sacrifice on the part of consumers who needs to pay higher for buying goods and services. Thus, growth in the economy requires a sacrifice.
Learn more:
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Answer details:
Grade: Middle School
Subject: Economics
Chapter: Economic growth
Keywords: what risks, does, economic growth, require, why, does, growth requires, sacrifice, trade-off in the economy, in the short run, inflation and growth, raising the economic growth, raising the aggregate demand in the economy, higher prices, goods and services, inflation control policy, growth-boosting policy.
