📚 Learning Guide
Economic Growth and Resource Allocation
hard

How does economic growth impact income distribution in the context of supply and demand?

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Choose the Best Answer

A

Economic growth leads to a more equal income distribution due to increased supply of jobs.

B

Economic growth can exacerbate income inequality as demand for skilled labor increases faster than for unskilled labor.

C

Economic growth has no effect on income distribution since it affects only total output.

D

Economic growth results in uniform income distribution across all sectors.

Understanding the Answer

Let's break down why this is correct

Answer

Economic growth refers to an increase in the production of goods and services in an economy over time. When the economy grows, it often leads to higher demand for products, which can create more jobs and increase wages. However, not everyone benefits equally from this growth; some people may see their incomes rise significantly, while others may not see much change at all. For example, if a tech company expands due to high demand for its products, the skilled workers may receive higher salaries, while unskilled workers may not experience the same increase. This difference in income growth can lead to a wider gap between the rich and the poor, highlighting the importance of how resources are allocated during economic growth.

Detailed Explanation

Economic growth can lead to more jobs, but not all jobs are the same. Other options are incorrect because This idea suggests that more jobs will help everyone equally; This option claims growth only affects total output, not income.

Key Concepts

Economic growth
Supply and demand
Income distribution
Topic

Economic Growth and Resource Allocation

Difficulty

hard level question

Cognitive Level

understand

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