...Compound Rates of Growth In the modern version of an old legend, an investment banker asks to be paid by placing one penny on the first square of a chessboard, two pennies on the second square, four on the third, etc. If the banker had asked that only the white squares be used, the initial penny would have doubled in value thirty-one times, leaving $21.5 million on the last square. Using both the black and the white squares would have made the penny grow to $92 million billion. People are reasonably good at forming estimates based on addition, but for operations such as compounding that depend on repeated multiplication, we systematically underestimate how quickly things grow. As a result, we often lose sight of how important the average rate of growth is for an economy. For an investment banker, the choice between a payment that doubles with every square on the chessboard and one that doubles with every other square is more important than any other part of the contract. Who cares whether the payment is in pennies, pounds, or pesos? For a nation, the choices that determine whether income doubles with every generation, or instead with every other generation, dwarf all other economic policy concerns. Growth in Income per Capita You can figure out how long it takes for something to double by dividing the growth rate into the number 72. In the twenty-five years between 1950 and 1975, income per capita in India grew at the rate of 1.8 percent per year. At this rate, income doubles...
Words: 2670 - Pages: 11
...ABSTRACT Pakistan’s growth experience over the past sixty years is both impressive and disappointing. It is impressive because rapid growth rate has resulted in a quadrupling of per capita incomes and reduction in poverty levels by one half despite fairly high population growth. Structural changes have transformed a predominantly agrarian economy to a more diversified production structure. But there is a sense of disappointment too. Social indicators are among the worst in developing countries. The economy of Pakistan is the 27th largest in the world in terms of purchasing power parity (PPP), and 44th largest in terms of nominal GDP. 1950's & 1960's * GDP of agriculture declined, of industry doubled, of construction increased, electricity / gas and that of the services sector also increased. * more jobs were provided like transport, communication, construction and services * Industrial growth was 23% per annum in the first plan period (1955-60) * 1% percent during the second plan period (1960-65) * The food grain shortage in early 1950s because of the poor performance of the agriculture sector, forced Pakistan to borrow long term credits for imports of food grain. * Agriculture sector grew from 1.0% in the first plan period to 3.7% during the period 1960-65. * The era of war 1965 was featured by marked decrease in foreign loans inflow, slow down the industrial growth, and increase in defense expenditures and re-imposition of certain controls...
Words: 956 - Pages: 4
...EDUCATION QUALITY AND ECONOMIC GROWTH Education Quality and Economic Growth Education Quality and Economic Growth Eric A. Hanushek Ludger Wößmann THE WORLD BANK Washington, DC © 2007 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved 1 2 3 4 5 10 09 08 07 This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development / The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy...
Words: 17789 - Pages: 72
...Economic growth Economic growth is the increase in the amount of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP. Growth is usually calculated in real terms, i.e. Inflation-adjusted terms, in order to obviate the distorting effect of inflation on the price of the goods produced. ( Wikipedia, 10th december 2012) Executive summary- Economic growth is the growth what every economy and country are desperate to achieve for the sake of the country’s population. The aim is produce more and goods in order to increase the standard of living simply by increasing the wages of mass population. Increasing standard of living is to provide quality food, better and better service and education, latest technology in order to ease everyday’s life. The expectation in order to achieve faster growth are usually are on the rise in the hope of building better and prosperous country. Economic growth is considered to be a positive to be a positive side of an economy but at what extent? A countries economic growth is visible by its infrastructure, urban development, globalization, higher education rate; create employment and higher wages for poor worker and many other positive changes. When the demand of economic growth there are a few who thinks of the negative effect it might have. There are many negative concerns about faster economic growth and this is environmental issues, sometimes...
Words: 1833 - Pages: 8
...Agriculture, services and manufacturing industries play a vital role in the development of the Indian economy. The IT outsourcing, software and call center/ BPO industries, in particular, have helped skyrocket India’s economic development in recent years. Economic development in India still depends on the various sectors that constitute the Indian economy – agriculture, services and manufacturing industries. India is rated as one of the top economies in the world in terms of purchasing power parity (PPP) of the gross domestic product (GDP) by leading financial entities of the world, such as the International Monetary Fund, the World Bank, and the CIA (as referenced in the CIA World Factbook). As far as agriculture is concerned, India is the second largest in volume of output. Certain related sectors of agriculture have played a major role in the development of the Indian economy by providing employment to a number of people in the forestry, fishing and logging industries. In 2009, the agricultural sector contributed 17.5% to the entire GDP, and more than 50% of the total labor force working in India is employed in the agricultural sector. Production volume has gone up in Indian agriculture at a consistent rate since the 1950s. Much of this improvement can be attributed to the five-year plans that were established for the development of Indian agriculture. Developments in irrigation processes, as well as various modern technologies used have contributed to the...
Words: 3844 - Pages: 16
...Journal of Business, Economics & Finance (2012), Vol.1 (2) Manni and Ibne Afzal, 2012 EFFECT OF TRADE LIBERALIZATION ON ECONOMIC GROWTH OF DEVELOPING COUNTRIES: A CASE OF BANGLADESH ECONOMY Umme Humayara Manni1, Munshi Naser Ibne Afzal1 1 Universiti Brunei Darussalam, Faculty of Business, Economics and Policy Studies, Brunei. ABSTRACT The objective of this paper is to assess the impact of trade liberalization on Bangladesh economy between the periods 1980 to 2010. This research analyzes the achievements of the economy in terms of important variables such as growth, inflation, export and import after trade liberalization. The paper uses simple Ordinary Least Square (OLS) technique as methodology for empirical findings. The analysis clearly indicates that GDP growth increased consequent to liberalization. Trade liberalization does not seem to have affected inflation in the economy. The quantitative analysis also suggests that greater openness has had a favourable effect on economic development. Both real export and imports have increased with greater openness. Liberalization policy certainly improves export of the country which eventually leads higher economic growth after 1990s. The findings of this study can be an interesting example for trade liberalization policy study in developing countries. KEYWORDS Trade liberalization, economic growth, developing countries, Bangladesh economy, OLS technique, openness, export, import, inflation 1. INTRODUCTION Like many...
Words: 3680 - Pages: 15
...Economic growth is increases in output. It can occur if previously unemployed resources are employed, there are more resources or existing resources improve in quality (Grant and Stanlake, 2000:285). According to the report, the economic gap between the north and the south of the United Kingdom was significantly enlarged in 10 years (White, 2015). Regional outcomes in Britain have exhibited strong signs of divergence and asymmetries on the basis of a North-South divide for over twenty years (lse.ac.uk, 2006). The purpose of this essay is to examine the regional imbalance in the United Kingdom. After first explaining measurable growth by some economic theories, it will analyse actual and potential growth by drawing business cycle and LRAS diagrams. Next, it will analyse the reasons for regional imbalance. Finally, it will evaluate actual supply side policies. Real GDP measures the value of goods and services produced at constant prices, the change of the real GDP only reflects the change of the quantity of production. In addition, people prefer to use real GDP than nominal GDP because real GDP reflects the economy’s ability to satisfy people’s needs and desires (Mankiw and Taylor, 2011:496-497). According to below graph, it shows that UK economy has experienced up-and-down swings in the years since 2003. Before 2008, growth more stable between 0.2 and 1.8 per quarter. However, GDP is more unpredictable after 2009. (Source: BBC news, 2015) The first type is actual growth which...
Words: 2107 - Pages: 9
...report with the exception of quarter IV in 2012 it seems that the third and fourth quarters have a more stable and higher GDP rate than quarters one and two. According to the graph the largest swing has been this past years quarter 1 to quarter 2, going from just under -2% to 4.2%. The least amount of growth or biggest decrease in real GDP would be the time from quarter 4 of 2013 to quarter 1 of 2014 going from 3.5% down below -2%. Based on what I have researched I believe the real GDP will discontinue its upward swing and level back out to about 2 to 2.5% by the end of quarter 4. The wage growth is slowing down and finance purchasing is coming to a surprising halt implying that less spending will take place than previously estimated for the year. In the public sector, improved economic conditions are widely spreading generating more state and local revenue while the federal spending has a tight fiscal policy stance. This creates a slowing growth potential in the long run making it appear that the economy is approaching its full capacity when looking at productivity, available jobs and investment opportunities. This can lead to a tighter labor market and slower economic growth. Wages are always a subject of discussion but for most of this year have been a popular topic, especially in the lower parts of the economy (minimum wage jobs). I believe one of the biggest issues that could affect the GDP would be raising the minimum wage. Many people working part time jobs especially...
Words: 529 - Pages: 3
...Economic growth is the path to better living standards that will improve society, and the nation’s infrastructure (McConnell, Brue, & Flynn, 2015, b). In addition, economic growth can improve disability access, prevent poverty (homelessness), and is measured in two ways via percentage increases/decreases. Measuring economic growth entails two methods: (1) during an increase in real GDP over a period of time; and (2) during an increase in real GDP per capita over a period of time. GDP is measured every quarterly (three months) or annually; and has the necessity to support income improvements for better productivity. Unfortunately, there are some factors that will either boost or reduce economic growth. First, supply factors boosts quantity and quality of natural and human resources, capital goods (supply), and technological improvements. Second, demand factors such as government, household, and business spending can boost or reduce economic growth; and third are the efficiency factors that will increase or decrease economic demand. The efficiency factors include productive, allocative, resources, and full employment; these factors are needed in order to “lessen the burden of scarcity’ (McConnell, et al., 2015, p. 569, b). This means that economic growth cannot remain constant or smooth overtime and it is not shared equally by all countries. Other factors that will boost or lower economic growth include extra leisure, newly developed products or services, property rights...
Words: 643 - Pages: 3
...Economic growth and Small Countries Kathy Brophy ECO204: Principles of Microeconomics November 21, 2010 Phelicia Price Economic growth and Small Countries Economic growth in many countries is a slow bitter process. With disease, current high population numbers, growth in population, limited resources, and much more will limit a small and poor country’s from being able to build capital. The AIDS virus has taken many innocent victims and left others ill and unable to work. The numbers of AIDS victims are large by any standard. I was worried about the virus getting close to home when I learned of its existence in the late 1980’s. Since then I have come across several persons that currently have the virus or have died from the AIDS disease. Healthy individuals are needed to work in order to build product for consumption and exporting. Economic growth through resources will build much needed capital, which will increase a countries wealth in time. The HIV/AIDS pandemic has been most devastating for the smaller uneducated countries around the world. (Case, Fair, & Oster, 2009) The HIV/AIDS pandemic has been the most devastating disease in the world. Forty million were infected with the virus before the year beginning 2006. Twenty-five million people died from aids by the end of 2006. (Case, Fair, & Oster, 2009) “In 2005 alone, 3.1 million people died of AIDS and 4.9 million were newly infected with HIV (Case, Fair, & Oster, 2009)”. These numbers are...
Words: 1777 - Pages: 8
...THE EMPIRICAL ANALYSIS OF IMPACT OF FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH IN NIGERIA BY OKUNLOLA TUNDE S. MATRIC NO: 139191 September 2011 Being research work submitted to Department of Economics, Faculty of Social Sciences, University of Ibadan, in partial fulfillment of the requirement for the award of Bachelor of Science (B.Sc) in Economics CERCTIFICATION I hereby certify that this work was carried out by OKUNLOLA TUNDE S. of Matric No 139191 in the Department of Economics, Faculty of Social Sciences, University of Ibadan. …………………………………. ……………………………… Date Dr. B. Fowowe Supervisor DEDICATION My sole dedication goes to God almighty whose mercy has never ceased in changing me despite all odds, whose boundless love and vast grace is bringing to pass my childhood dreams and fantasies. ACKNOWLEDGMENT My deepest gratitude goes to my parents who always, tirelessly and sacrificially support me, trust me, care for me and love me despite all my short comings and even when it so difficult. May the lord reward you abundantly. And also to my supervisor, Dr. B. Fowowe, I say thank...
Words: 12592 - Pages: 51
...is most often synonymous with the progression and growth from lower economic status to that which is advanced it be of a community or country such that its productivity noticeably increases. Many scholars as such agree that growth in economic proficiency as is brought about by economic growth is a yardstick for development. It is on this particular premise that this paper shall endeavour to describe economic growth and further elaborate why it is considered a crucial element in defining development. In this light, the paper shall also attempt to highlight and explain the limitations of this approach in measuring development. Economic Growth- Defined As suggested above, economic growth is a factor in achieving development. An accurate description according to the IMF (2012) is that economic growth is a process that involves the increase in the amount of the goods and services produced by an economy over time which is conventionally measured as the percentage rate of increase in Gross Domestic Product (GDP). GDP is the What this approach therefore depicts is that for development to be considered to have taken place, there should be an increase in the capability of an economy to produce goods and services, as compared from one period of time to another. This increase must be measurable with respect to the productive output of each sector of the economy. In relation to this, Todaro and Smith (2011) state that economic growth has three essential components, namely: •...
Words: 1382 - Pages: 6
...The Impacts of Economic Growth Economic growth is the increase in the amount of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP. There are many positives and negatives with economic growth. Economic growth improves standard of living through sustained GDP growth, it improves tax revenues and provides the government with more money to spend on healthcare, education etc. Growth boosts business profits, a stronger economy increases consumer confidence therefore allowing people to purchase luxuries and once again improve their standard of living. Economic Growth will also increase employment, as growth increases as do business profits, therefore companies have more available finances to be able to pay wages and therefore levels of employment increase. Economic Growth can help protect the environment, as business profits increase, companies have more finance and can therefore invest in carbon investment, innovation and research and development to reduce the amount of harmful substances released during the production stages, therefore reducing their effect on the environment. On the other hand, economic growth poses as a threat of inflation risk. Increase in demand may be more than available supply and will therefore cause prices to rise, so consumer confidence decreases along with standard of living and business profits. Economic growth can have a negative...
Words: 321 - Pages: 2
...THE FUTURE OF ECONOMIC CONVERGENCE* Dani Rodrik Harvard University August 2011 * This is a paper prepared for the 2011 Jackson Hole Symposium of the Federal Reserve Bank of Kansas City, August 25-27, 2011. I am grateful to Arvind Subramanian for helpful conversations and to UNIDO for making their INDSTAT4 data base available. I also thank Cynthia Balloch for research assistance and the Weatherhead Center for International Affairs at Harvard for financial assistance. I. Introduction Novelists have a better track record than economists at foretelling the future. Consider then Gary Shteyngart‘s timely comic novel ―Super Sad True Love Story‖ (Random House, 2010), which provides a rather graphic vision of what lies in store for the world economy. The novel takes place in the near future and is set against the backdrop of a United States that lies in economic and political ruin. The country‘s bankrupt economy is ruled with a firm hand by the IMF from its new Parthenon-shaped headquarters in Singapore. China and sovereign wealth funds have parceled America‘s most desirable real estate among themselves. Poor people are designated as LNWI (―low net worth individuals‖) and are being pushed into ghettoes. Even skilled Americans are desperate to acquire residency status in foreign lands. (A degree in econometrics helps a lot, as it turns out). Ivy League colleges have adopted the names of their Asian partners and yuan-backed dollars are the only safe currency. This is sheer fantasy...
Words: 13025 - Pages: 53
...Södertörns högskola | Department of economics Magisteruppsats 30 hp | Vårterminen 2013 The Effect of External Debt On Economic growth – A panel data analysis on the relationship between external debt and economic growth. Av: Dereje Abera Ejigayehu Handledare: Joakim persson Handledare: [Handledarens namn (teckenstorlek: 12p)] Abstract The impact of external debt on economic growth is a debatable issue between scholars since the onset of the debt crisis in 1980’s. This thesis examines whether external debt affects the economic growth of selected heavily indebted poor African countries through the debt overhang and debt crowding out effect. This is carried out by using data for eight heavily indebted poor African countries between 1991 to 2010.The result from estimation shows that external debt affects economic growth by the debt crowding out effect rather than debt overhang. Moreover, in an attempt to mark out debt servicing history, the thesis found the selected countries are not paying (servicing) more than 95% of their accumulated debt. Key Words: External Debt, Debt overhang, Debt crowding out, debt servicing and Table of Contents CHAPTER ONE .....................................................................................................................................1 INTRODUCTION ..................................................................................................................................1 1.1 Background of the study.............
Words: 12805 - Pages: 52
