Economic growth is deeply associated with the general welfare of an economy. In fact, economic development which is so essential for a nation will only start to roll only when the economy grows beyond a threshold growth limit. It has now been proven beyond doubt that economic growth is pivotal in shaping the standard of living of the residents. This happens through a cycle in which productivity of the household transforms into disposable income through the intermittent stages of aggregate demand and income. Economic growth will lead to an increase in the aggregate demand which will trigger an increase in the production of goods and services. Consequently, the residents of the nation who are employed in the production activities will enjoy a higher wages that will increase the income at their disposal. This is the basic framework in which an economy operates and is defined as the vicious cycle. Numerous developments have been made by economists on this model which tries to incorporate the changing dynamics of growth and development. The importance of growth is perhaps defined most prominently by the basic framework which involves both the household and production activities.
The role of government in augmenting growth has been a key area of research and analysis among scholars all over the world. The capitalists have been instrumental in propagating a view where the government will have a minimal role in the economic activities. Adam Smith, in his theory of the invisible hand claims that the economy will be at the equilibrium automatically due to the action of an Invisible hand. The government thus can keep away from controlling the economy in various aspects. This held good till 1929, when the Great Depression shook the world and people's faith in the theory of automatic solution.
A paradigmatic shift occurred post the Depression, during which the theory of John Maynard Keynes gained predominance. It was Keynes who suggested that the government had an important role to play in controlling and monitoring the economy. It would have a substantial role to play achieving the required growth of the economy.
Generally an economy has three basic sectors, based on the occupational structure; agriculture, industrial and service. The role of government is of prime importance in the initial stages of growth. It is during this period that huge volumes of investment are required to provide with the initial boost. The private investment sources are absent in such a scenario because of their apprehensions of the return on the investment. It is only the national government which can fund the huge demands or make arrangements to source it from external sources. The government keeps the machinery running by investing in the development of infrastructural facilities which is so essential in building the economic base of a nation. A country will seldom experience private investments flowing in at the initial stages due to long gestation period of such projects and a considerable time lag before the project yields expected returns. The government is also the sole authority that maintains the growth balance of the economy through monitoring the growth of all the sectors. The optimal distribution of effects of growth will never be possible without the active participation of the
Economic literature defines economic growth as the increase in Gross Domestic Product (GDP) over time. However, growth has more components to be analysed upon. Economists around the world are expanding the domain of the traditional definition of growth to encompass the concept of value addition…
Overtime the general level of prices rise due to inflation leading to increase in nominal GDP even if the volume of goods and services produced remain unchanged. Real GDP is that which has been adjusted for price changes. It measures the value of output in two or more different years by valuing goods and services adjusted for inflation.
In this paper, we will discuss how fiscal deficit and debt position of a country affects its economic growth. We will take the example of Germany and assess the data from 1998 to 2012 to make conclusions about this relationship. Fiscal Performance of Germany (1998-2012) Year Govt Debt (€ billions) Deficit/Surplus (€ billions) Real GDP % ?
This essay specifies concrete measures, undertaken by the government to overcome the negative effects of the crisis in the finance industry. These included such steps, as creation of regulatory agencies for financial products, stricter banks monitoring, new laws formulating, implementation of new regulations and others.
According to the essay, China and India have not only emerged as economic superpowers during last decades, but also displayed potential of qualitative improvement of the social and political interactions between the countries. The mutual interest of the countries contributed to the cause. Trade ties and bilateral co-operation acted as the catalyst.
In this quarter the level of GDP declined as a result of the decline in customer spending by 1%, this decline was as a result of the high levels of unemployment in the economy. (Alan Rapperport (2009))
The current recession is considered the longest since 1947 and due to increased government spending the budget deficits this year is expected to reach $1,600 billion.
These theories include the exogenous growth model as well as endogenous growth model. This paper will represent an examination of the viability of several governmental initiatives aimed determining the if certain policies will facilitate economic growth whereby a developing nation is able to catch up with already developed nations and to maintain a steady-state after catch up.
Although it is true that economic growth alone can not bring sufficient changes in the average level living standard of people living in a particular country, it is an important component for obtaining higher quality of life. So, one of the major aims of any country across the world is to attain higher level of economic growth.
However, the real GDP per person in the country more than doubled between 1963 and 2003 (Parkin 425). In the rest of the world, specifically Asia, the growth in real GDP was even greater.
Specifically, a look at the world's seven biggest economies (United States, Japan, Canada, France, Germany, Italy and United Kingdom) shows that real GDP per person has grown steadily from 1963 to 2003.
The report also highlights the economic outlook and forecasts of Israel through the analysis of relevant economic parameters provided by OECD. It was found that though Israel’s economic growth slowed down in 2014, but it again picked up at the end of the year and has been experiencing positive growth since then due to substantial investments.
7 pages (1750 words)Essay
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