Development of Rural Economy - Thesis Example

Economic growth is believed to be evenly distributed when it helps both the rural and urban areas of a country. In this, the economy of USA is taken as model for development that could be used by Australia and Iraq to develop their rural side. It is believed that although Australia and Iraq are among the richest nations of the world but they have failed to develop their rural areas and there is large disparity of income and standard of living between people of rural and urban areas. The paper does not only talk about economic issues related to the lack of growth of rural areas in the countries mentioned above but also talks about the social issues and social changes that are needed to be imposed by the governments of respective nations in their search of achieving balanced economic growth.

This paper has also suggested a new theory of rural vs. urban trade-off to explain how investment could result in growing both the rural and urban areas of any economy. Economic growth is a field of Development Economics that shows the growth in GDP or annual out of a economy over a period of time which is usually taken as a year. An economy is said to be growing if the output in the current year is greater than the previous year. For example, if the GDP in current is $120, whereas in the previous year it was $100, then one can safely that the economy is growing by 20%.

Economists usually prefer diffused growth in the economy rather regional growth. The reason behind this is that region growth leads to disparity between different region of a country and can lead to urbanization and problems that coincide with it.Economic growth is usually brought about by following factors or by the following conditions:Output is growing: This implies that output in the current year should be greater than the output produced in the previous year.Output should be greater than inflation and population growth: Some times price increases also tend to move up the value of output.

However, any value increase of GDP due to inflation is not considered as an economic growth of a country. Economic growth occurs when there is physical increase in the quantity of goods and this increase should also be greater than increase in population growth for an economy to grow. United States of America meets these conditions better than Iraq and Australia and that is why American economy has grown so much relative to these economies.Labor Productivity increases: If Labor productivity increase, they will be able to produce more output in the given production hours.

This will result in economic growth of an economy and the United States of America is a prime example of this.Investment in Capital Goods: More capital means that the economy