Economic Growth

In: Historical Events

Submitted By arezo
Words 359
Pages 2
Section one: Critically examine the main assumptions of Rostow’s modernization theory and their relevance for the understanding the historical and contemporary “development” of low-income countries. Does Gerschenkron’s account of the different features and agents of industrialization in “backward countries” support or challenge (or both) Rostow’s stages of development? What are some of the main similarities and differences in these two accounts of modernization?
What is development, what does it mean to be developed and how states can achieve it are the questions that those who involved in field of development studies are trying to answer. They are also concern about why some countries are more developed while not others. Rostow and Gerschenkron are answering all these questions by introducing their theory of development.
I would like to start with Rostow’s theory of development; in the Stages of Economic Growth he argues that a state should follow some rule and should pass through some important stages in order to develop. According to Rostow these are the stages of economic growth ,Traditional society, Pre-conditions for take-off, Take off, Drive to maturity, Age of high mass consumption and beyond consumption.
Traditional society is characterized by survival agriculture or hunting and gathering with a limited technology. At this stage people look at change negatively. Pre-conditions to "take-off" in this stage there is more demand for raw materials and technology and batter machinery system to use in agriculture. Take off the stage of economic growth that Urbanization increases, Industrialization proceeds, and sectors in the economy shifts quickly towards secondary. Similarly the other stages of economic growth also have some requirements

In this essay, he talks about the theory of economic development. He argues that the more backward an economy is,…...

Similar Documents

Economic Growth

...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...

Words: 1777 - Pages: 8

Economic Growth

...INTRODUCTION Development is a multi-faceted process. It 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...

Words: 1382 - Pages: 6

Economic Growth

...I. MACROECONOMICS Issue or Problem: Economic growth II. SUMMARY/Synopsis OF ARTICLE: Economic growth has dropped to .1% in the Eurozone. After an 18 month recession, the countries began to show economic growth. However, while in the last period growth was at .3%, this period it has dropped. In order to increase grown, Europe’s central bank cut interest rates to just .25%. This drop in economic growth is different in the Eurozone countries. Weaker countries had to even taken bailout money. Some of the affects it had on citizens were large-scale job cuts, reduced wages and pensions, higher taxes and widespread changes to public services. Even more prominent countries, such as France and Germany, showed decreases in growth. One of the reasons a decrease in growth is happening in the Eurozone is because of a decrease in exports. Exports dropped to 1.5% in the third quarter. While there was a decrease in exports, some are saying that production is picking up and that there should be a gain soon. III. MACROECONOMICS CONCEPTS: A.) 1) Recession-a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters. 2) Contraction- the process of becoming smaller. 3) Interest Rates- the annual rate at which interest is paid: a percentage of the borrowed amount. 4) Debt- something, typically money, that is owed or due. 5) Unemployment- the failure to use all available economic...

Words: 1496 - Pages: 6

Economic Growth

...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...

Words: 1833 - Pages: 8

Economic Growth

...Economic Growth Question 1 GDP in 2010 €2500bn % Change in 2011 0.7% €2,500bn x 0.7 = €17.5bn China has consistently the highest growth rates in GDP year on year and of the counties listed appears to be the main driver of growth as the other economies pattern of growth remains flat. For example the estimated growth in 2013 for China is 8.3% whereas the other economies are predicted to grow between 0.3% and 2%. Question 2 Fiscal drag is a concept where inflation and earnings growth may push more taxpayers into higher tax brackets. Therefore fiscal drag has the effect of raising government tax revenue without explicitly raising tax rates. In 2014, fiscal drag has pulled more and more taxpayers into the threshold at which people start paying the 40% tax rate of income tax. Just 1.4m people paid it when Lord Lawson established the 40p rate in 1988. This year 4.4m will do so. Question 3 Some view GDP as an inaccurate measurement for economic development. There are many limitations; GDP measures the quantity of goods produced in an economy without taking into consideration the effect those goods have on the economy. Higher quality goods/ new products replace the older products in the market, for example medical equipment improves constantly with technological advancements, however, GDP does not take into account how these changes have a positive impact on peoples lives, therefore increasing their quality of life; a factor of GDP. Another...

Words: 933 - Pages: 4

Economic Growth of Pakistan

... deficit from an annual average of 4.1% of GDP * Removal of non-tariff barriers, tariff rationalization and exchange rates reforms during 1990’s have implications for imports and exports * The foreign investment was encouraged through many incentives * THE 2000s The structural reform programs designed and initiated in 1990s, was continued and pursued during 2000s to put the economy on the path of recovery. The privatization process was pursued; main focus was on banking, telecommunication, oil and gas and energy sector. Liberalization of Foreign exchange regime and macro economic stability helped boosting investor’s confidence. Stock markets became extremely attractive for foreign investment. * The GDP growth rate remained around annual average of 4.9% during 2000s * The Fiscal deficit remained around annual average of 4.5% of GDP while the primary balances remained surplus. * The current account balance remained surplus around an annual average of 1.9% of the GDP * exports fluctuated around 18.4% * imports grew at a faster rate of 40% * Inflation rate remained below 4% in early years but later on it become 5.7% per annum. * The period recorded investments around annual average of 17.3% of GDP where as saving rates remained around 17.8% of GDP on average. 2012 to 2013 The Gross Domestic Product (GDP) in Pakistan expanded 3.59 percent in the fiscal year 2012-13 from the previous year. * Pakistan’s economy continued to......

Words: 956 - Pages: 4

Economic Growth

...Nick Hutton Macroeconomics Dr. Danielle Pitzer-Brandon September 19, 2014 GDP Research Paper The second quarter highlight report for the GDP was released August 28, 2014. From the data given in the 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...

Words: 529 - Pages: 3

Economic Growth

...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...

Words: 643 - Pages: 3

Economic Growth

...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...

Words: 2670 - Pages: 11

Economic Growth

... its various parts. Developing the response to the question (Application) • Low inflation for achieving economic stability and sustained growth Extract B (lines 2 & 3) Reference to energy costs and primary commodity prices Extract B (lines 12 &13) The brake on hesitant recovery Extract B (lines 21 & 22) The dangers of loose monetary policy in the UK Extract C (lines 7–11) The breeding of ‘uncertainty’ Extract C (line 11) Disruption to trade and investment flows (Extract B lines 19 & 20) Cost-push inflation Demand-pull inflation AD/AS analysis Balance of payments Competitiveness. • • • • • • • • • • 8 of 26 MARK SCHEME – A LEVEL- ECON4 – 2140 – JUNE 2014 Analysis • • • • • • • • Evaluation • • • • • • • • The notion of ‘impact’ Measurement of impact in the context of the balance of payments World commodity prices increases and the UK import bill UK competitiveness given the authorities’ success or failure in controlling inflation The impact of imported inflation on future balance of payments’ performance Inflation, the UK exchange rate and the balance of payments The impact of global inflation on the macroeconomy of other countries and how this will inevitably impact on the UK’s balance of payments Investment flows and the capital account. Is the problem in almost every part of the global economy and what, therefore, is the relevance of this to the UK balance of payments? Is the problem one...

Words: 7373 - Pages: 30

Economic Growth

...Africa’s performance and prospects Africa’s macroeconomic prospects Africa’s gross domestic product (GDP) growth is expected to strengthen to 4.5% in 2015 and 5% in 2016 after subdued expansion in 2013 (3.5%) and 2014 (3.9%). The 2014 growth was about one percentage point lower than predicted in last year’s African Economic Outlook, as the global economy remained weaker and some African countries saw severe domestic problems of various natures. But the world economy is improving and if the AEO 2015 predictions are right, Africa will soon be closing in on the impressive growth levels seen before the 2008/09 global economic crisis. Figure 1. Africa’s economic growth, 2002-16 0 1 2 3 4 5 6 7 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(e) 2015(p) 2016(p) Africa Africa excluding Libya Growth rate (%) Note: (e) estimates; (p) projections. Source: Statistics Department, African Development Bank. West Africa achieved relatively high growth of 6% in 2014 despite its battle with the Ebola virus (Box 1). Nigeria’s growth of 6.3% came mainly from non-oil sectors showing that the economy is diversifying. But Southern Africa’s growth fell below 3% as the key South African economy only grew by 1.5%. Overview ii African Economic Outlook © AfDB, OECD, UNDP 2015 iii Table 1. Africa’s growth by region, 2013-16 (Real GDP growth in percent) 2013 2014 (e) 2015 (p) 2016 (p) Africa 3.5 3.9 4.5 5.0 Central Africa 4.1 5.6 5.5 5.8 East Africa 4.7 7.1 5.6 6.7 North Africa 1.6 1.7...

Words: 2461 - Pages: 10

Implications for Economic Growth

...Population-Control-Policies and their Implications for Economic Growth in China Bachelor’s Thesis supervised by the Department of Economics at the University of Zurich Prof. Dr. Fabrizio Zilibotti to obtain the degree of Bachelor of Arts in Economics Author: Noemi Schramm Course of Studies: Economics Closing date: August 17, 2011 Abstract This bachelor thesis is giving an overview on previously performed research how family-planning-policies in China (explicitly the so-called One-Child-Policy) have affected economic growth since 1979 and tries to give possible predictions and forecasts on how it could affect economic growth until 2050 through critical model analysis. The Solow model gives theoretical answers but also yields analytical results through calculations subject to different population development scenarios (low, middle, high growth rates). The dependency ratio as a measurement of population age structure is analyzed and implemented into the Solow model to help understand the influence of family-planning-policies. It is shown that the One-Child-Policy affected heavily the last 32 years of China’s economic development and will continue to affect its future, but according to the calculations in this paper, the impact changes from a positive one to a negative one. Acknowledgements I would like to thank Professor Fabrizio Zilibotti for his supervision and for giving me the opportunity to write my thesis at his chair. Especially I would like to thank Yikai Wang...

Words: 11172 - Pages: 45

Economic Growth

...In some ways I agree the economic growth can be desirable, however there can be some negatives towards it. My first point is that economic growth can lead to an increase in standard of living, this is clearly a good thing. tho scan be seen in China, over the last 20 years china has seen some massive economic growth which has brought thousands out of poverty. If standards of living are increased then disposable income also increases which leads to an increase in consumer spending. If more people are spending money then the economy grows. Secondly economic growth can lead to an income rise And income rise can also lead to an increase in disposable income. Therefore bot these points lead to an increase in consumer spending and also an increasing aggregate demand, leaving real national output to increase. The benefits of economic growth for all economies and especially LEDCs are increased employment, reduced poverty and a high standard of living. These events occur because as AD increases, more factors of production, most notably labour are needed to produce goods and services for the economy. When this occurs on a large scale unemployed workers shift into employed. This is beneficial as governments provide less social security for the population so they can spend more money on public services. As a result of increased government spending, the quality of services such as education, health and shelter will become better hence improving the standard of living. Previously...

Words: 416 - Pages: 2

Economic Growth

...Section one: Critically examine the main assumptions of Rostow’s modernization theory and their relevance for the understanding the historical and contemporary “development” of low-income countries. Does Gerschenkron’s account of the different features and agents of industrialization in “backward countries” support or challenge (or both) Rostow’s stages of development? What are some of the main similarities and differences in these two accounts of modernization? What is development, what does it mean to be developed and how states can achieve it are the questions that those who involved in field of development studies are trying to answer. They are also concern about why some countries are more developed while not others. Rostow and Gerschenkron are answering all these questions by introducing their theory of development. I would like to start with Rostow’s theory of development; in the Stages of Economic Growth he argues that a state should follow some rule and should pass through some important stages in order to develop. According to Rostow these are the stages of economic growth ,Traditional society, Pre-conditions for take-off, Take off, Drive to maturity, Age of high mass consumption and beyond consumption. Traditional society is characterized by survival agriculture or hunting and gathering with a limited technology. At this stage people look at change negatively. Pre-conditions to "take-off" in this stage there is more demand for raw materials and technology...

Words: 359 - Pages: 2

Economic Growth

...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...

Words: 2107 - Pages: 9