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Understanding economic inequality
Understanding economic inequality

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5.1 Economic growth and inequality

An important measure of society’s wellbeing for economists is economic growth. In Section 4.2.1 you learned about the national income of a country, that is the total income generated in an economy. By calculating the change in the level of the national income in an economy over time, you can determine how much the economy has grown. This is known as economic growth.

If the economy is growing, this means that there are more goods and services for households to consume, which in principle makes everyone in the society better off.

How does income inequality affect economic growth? This has been a topic of a long-standing debate among economists. Complete Activity 12 to explore this debate.

Activity 12 Inequality v growth

Timing: Allow about 20 minutes

Have a go at exploring this interactive asset: Inequality: have your say [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)] . There, you will be able to take an interactive tour through a fictional country, Economica, to explore various questions about inequality.

After a difficult year for much of the population, all eyes are on the Prime Minister to determine the economic future of the increasingly unequal country. You’re about to get the inside scoop on her plans and the arguments that support and oppose her view.