Free Essay

Economic Growth in North Cyprus

In: Business and Management

Submitted By belarusgirl
Words 3167
Pages 13
Introduction North Cyprus economy has been under economic embargoes for many years, and has been struggling to eradicate the income difference with the south of this island with extremely limited facilities. Successive governments have accordingly developed distinctive responses to cope with these difficulties. The political division in Cyprus has been a long standing political dispute of the world political scene. Despite various attempts by the international community, the division in the island still remains as it is; the Turkish side on the north and the Greek side on the south. The Turkish community on the northern side has been struggling for political recognition as a sovereign state by the international community, and has been under sever political and economic embargoes since 1983. So far, Turkey has been the only country that recognizes the sovereignty of North Cyprus, and has established close political and economic ties with it. In particular, economic isolation from the world economy to generate foreign currencies sources, which are inevitably required for a sustainable development of a small island economy, and this leaves North Cyprus economy extremely dependent on the Turkish economy and foreign currency inflows. In additional to political problems, North Cyprus also deals with economic problems of being a small island with limited natural resources and a very small domestic market which constitutes insufficient domestic demand that is required for any sectorial development . Due the almost full integration into the Turkish economy, the Turkish Cypriot economy is also exposed to all the real and monetary shocks and instabilities prevailing in the Turkish economy. The economic performance of the Turkish Cypriot economy has been far from the impressive in recent years, where is the economy grew on average , only 7% in the period 1985-1989, the same figure dropped to 2.9% for the period 1990-1998, and then increased slightly and reached 3.9% in the period 1999-3002. The Greek side, on the other hand performed remarkably well in growth in per capital income from 1988- 2002, averaging 3% annually. Under favorable conditions this impressive performance of the economy of the Greek side is expected to continue in the next decade. The present disparity between two sides of the island becomes even more evident when we look at the difference in per capital income. In 2003 Turkish Cypriots achieved only 5.949$ per capita income, whereas the Greek side reached 17,644$ per capita in the same year, estimate that per capita income of North Cyprus must grow steadily at around 5% in the next decade in order to catch up to the Greek side. Ayres (2003) is on the other hand presents growth rate estimates which would be sufficient to close the present income gap between two sides of the island, accordingly, he predicts that with in an acceptable period of time, say 15-20 years the capita income of the Turkish Cypriot economy has raise to over 7 % per annum. He respectively postulates that the resolution of the political dispute would be beneficial mostly for the Turkish side and with an appropriate macroeconomics policy and most important, the removal of all economic and political embargoes, the Turkish Cypriot economy would be able to generate sufficiently high growth rates in order to eradicate the income disparity between the two sides of the island.

This is clearly an unsustainable income disparity that could afflict a possible long-standing federal settlement of the political between two sides of the island. The elimination of these disparities should there for be considered as the pre-condition for the political stability and a possible future federal settlement in the island, the unification under the Annan plan was expected to boost income in North Cyprus by almost 12%. The Annan Plan was a United Nations proposal to resolve the Cyprus dispute. The proposal suggested to restructure the Republic of Cyprus as a "United Republic of Cyprus", which would be a federation of two states. It was revised a number of times before being put to the people of Cyprus in a referendum. The proposal was supported by 65% of Turkish Cypriots, but only 24% of Greek Cypriots. But the Annan Plan failed first because both sides lacked information on what federalism is and how it can be made to work. Second, the plan was deficient in terms of power-sharing, providing for the collection and allocation of indirect taxes. The third is the wrong perception, particularly in the south that economic inequalities would require large and persistent subsidies to the Turkish side by Greek Cypriots. After the failure of Annan plan in 2004, Turkish Cypriot were accordingly urged to implement appropriate policies in order to eradicate these disparities. However economic isolation offers little scope for closing the present development gap between two sides of the island , and a political settlement of the dispute allowing for the removal of economic embargoes must be considered as a pre-condition for launching appropriate macroeconomic policies which would yield sustainable high growth rates .although we would not be of Corse certain about the extent of the income-generating effects of appropriate macroeconomic policies after the settlement, there is at least one thing sure at the moment that economic embargoes and isolation have certainly had negative impact on the achievement of significantly high growth rates in the north Cypriot economy. Moreover, economic embargoes and isolation over time yield a distinctive economic structure as an income generating mechanism with some distortion which may constitute additional constraints on the nature of economic growth. Therefore the purpose of the paper is first to examine the impacts of economic embargoes on restructuring North Cyprus economy, and accordingly to examine the features of the income generation process. The second aim of the paper is then to measure how North Cyprus economy has dealt with the adverse effect of this isolation. Lastly the paper also seeks some answers as to what extent the removal of this isolation would contribute to the economic growth performance particularly in the eradication of the income divergence between the two sides. In doing so, it is additionally investigated which sectors would have capability of generating high growth rates.

Macroeconomic back ground and economic embargoes
A large number of empirical studies in the economic literature postulate that economic growth is the result of a sound macroeconomic policy stance and high investment in physical and human capital. In this respect TNC exhibits a mixed picture. The country seems to enjoy a high level of education, particular in recent years. As a crude indication of the physical stock, the country seems to have failed to attain in sound macroeconomic policy stance over the period 1985-2007. In particular inflation appears to have been the most crucial weakness of the economy, despite a declining trend in recent years, in an empirical examination -Çiftçioğlu - (2000) show the inflation has a negative effect on economic growth. A 10% increase in inflation seems to lead the economy to a 0.9% decline in economic growth . The economic performance of North Cyprus economy has been astonishing after failure of the Annan plan in 2004. The economic growth rate reached almost 10% in the period 2007-2007 after low and sluggish growth periods in the 1990s and in the early 2000s.
Economic growth in any economy shows the need for the finance which could be provided by four different ways in practice, namely domestic and foreign saving, aid and inflation. In the case of north Cyprus, inflation rather imported from turkey due to the adaption of Turkish lira as a national currency, and cannot be used for generating income in north Cyprus to finance economic growth. Utilizing foreign savings through borrowing and capital inflows is also restricted due to economic embargoes, and domestic saving seems to have been insufficient to finance high domestic expenditure and economic growth. The resource saving gap measured by difference between the ratios of saving and investment in GNP, persistently exhibits deficits in North Cyprus economy. Current account deficits of the country can also be considered as another indication of resource gaps, and a 6.3% deficit in the current account can account for the external finance requirement in the period feature of 2004-2007. This requirement is not a novel feature of North Cyprus economy. In the late 1980s , the economy achieved almost7% growth rate by generating only 5.4% current account deficit as share of GNP. With the slower pace of economic growth in the 1990-1998 and 1999-2003 periods, the current account deficit appears to have declined to 3.5%. However the recent distinguished performance of North Cyprus economy once again brought about the need of a large external finance resources to finance a 6.3% deficit of GNP in the period of 2004-2007. The sectorial decomposition of these deficits indicates a curial feature of north Cyprus economy and puts particular emphasis on the dominate role of the public sector in the use available resources in the economy. Accordingly the share of the budget deficit appears to have been around 7% of GNP with the only exception occurring in the period of 1999-2003. Despite a 3.9% low growth rate in this period. The public sector deficit jumped to 15.7% in the period of 1999-2003 from 7.6% in the period of 1990-1998. However this deficit seems to have closed in the following period. With the lack of foreign borrowing and insufficient domestic saving, North Cyprus remained extremely dependent on aid and credit from turkey in order to meet the finance requirement, and this appears to have reached 7.1% in the latest period.
When compared to the other factors other macroeconomic policies matter even more in the context of open economies. In a small open island economy, the overall economic performance is likely to be affected by openness to trade. This is mainly because the lack of sufficiently high domestic demand can be compensated by external demand. However the presence of economic embargoes in the case of North Cyprus and international restrictions on direct flights to the Turkish side of the island afflicts North Cyprus economy by stifling external demand. In the regard, the removal of exogenously imposed restriction on the trade of North Cyprus has been the subject of a long political dispute for some time, but there appears to be no positive result in this line so far. As a consequent of these restrictions on external demand, export earnings have remained insufficient to meet import bills. In particular, whereas exports seem to account only for 27% of imports in the period 1985-1989, this ratio drastically declined first 13% in the period 1999-2003, and then 5.8% in the period 2004-2007. The sectorial composition of GDP shows another interesting feature of North Cyprus economy. First of all the share of the agriculture sector seems continuously to decline from 13.9% in the period of 1985-1989, to 9.1%, 8.1% and finally to 7.5% in the 1990-1998,1999-2003, and 2004-2007 periods respectively. This trend implies that the agriculture feature of North Cyprus economy gradually disappeared. The manufacturing sector, on the other hand, does not seem to have taken over the declining position of agriculture. Despite a relatively high share in the 1985-1989 and 1990-1998 periods, this sector too has apparently lost its importance in GDP in recent years, and reached almost 10% in the latest period. Most interestingly these two sectors in North Cyprus economy are the only sectors producing tradable goods which could involve foreign trade and generate international liquidity through trade. Unlike them other sectors like domestic trade, public services, and transport and communication sector available in North Cyprus economy are mostly inward-oriented sectors, and are only able to generate income on local currency through domestic demand expansion. Despite its 23.5% share, the highest in the period of 1985-1989, the transport and communication sector becomes the second after public services in the latest period.
With respect to the capabilities of each sector to involve into international trade, we become able to group nine sectors available in north Cyprus economy as tradable and non-tradable sectors. This decomposition is especially important for a developing country. This is mainly because the size of the tradable sector can considered as an indication of foreign exchange earning capability of the economy. Accordingly the tradable sectors appears to be the agriculture and manufacturing sectors and their markets can considered as global in the event of free trade. The non-tradable sectors on the other hand have a local nature, and meet the local need with domestic supply. This decomposition shows that the non-tradable sectors and activities in North Cyprus economy gradually become overwhelmingly dominant activities. In the latest period the tradable sectors in GDP was 17.2% in comparison with 73% share of non-tradable output. These shares in the period of 1985-1989 were 25.2% and 67.3% respectively. This is clear indication that North Cyprus economy possesses an economic structure which largely produces non-tradable goods with limited capability of generation foreign earnings. In addition to this feature of the economic structure, embargoes also put the economy under an extra burden by restricting the involvement of the already existing tradable sectors into foreign trade, and reduce the capability of generating foreign currency through foreign trade which extremely necessary to close up resource gaps.
My idea of increasing economic growth of North Cyprus
There is a lot of ideas can bring growth to TRNC. After studying what the North Cyprus needs to achieve the growth I figure an idea which can bring investors and increase the tourist’s rate.
My idea is to build a fashion shopping mall for the worldwide fashion brands and make North Cyprus an open market for the fashion industry to make the fashion shows and expose.
By encouraging the investors to open in North Cyprus and make it as an open market for the fashion industry, people who travel to Paris and other countries to do shopping will start looking to North Cyprus as a new market where they can enjoy their shopping and nature in the same time.
The mall will have a food court section which also will be worldwide restaurants which provides all types of food.
One of the main incomes of North Cyprus is the high education. Students can spend a 1000$ monthly, but the shoppers can spend double this amount in less than a week. Of course, we will consider that North Cyprus has casinos which also those types of people can enjoy playing there.
As the food court section a small example that people demand a worldwide restaurants to be open , students demand MacDonald's and Starbucks to be here in North Cyprus. Of course, opening worldwide restaurants in the food court inside the mall will make even the students to go and enjoy the meals there.

Conclusion North Cyprus is a small island economy with a limited domestic market and natural resources. There has also been a political dispute with the Greek side of the island in existence since 1974. Since then, North Cyprus has been under several economic and political embargoes. A search for peaceful settlement of dispute is subject to existing to the existing income differences between the two sides of the island. The most recent attempt of finding a resolution of the dispute, namely the Annan plan, was accepted by a great majority on the Turkish side whereas it was rejected by the south. This income difference constitutes one of the major obstacles and it urges the need of appropriate macroeconomic policies to eradicate this inequality. However with the presence of economic embargoes, North Cyprus economy has had a very limited choice of action in this direction.
The response of North Cyprus economy to embargoes, and indicate that the income divergence between the two sides requires attaining high economic growth rates and expenditure accordingly. As one way of achieving this, the North Cyprus government has adopted the TL (Turkish lira) as a national currency. This has then enabled the economy to reduce the stringency of liquidity constraints on domestic expenditure and most importantly on imports directly from turkey. Direct and easy access to the Turkish capital market hence allows the availability of liquidity to surge without ever increasing production towards turkey and other foreign markets. Building a close economic, other than political, relationship had helped North Cyprus to by-pass the restrictions of the economic embargoes. Higher expenditure capacity of the economy to sustain the high domestic demand is provided by easy access to the Turkish capital market, high income policies and transfer payments. But these policies have also accounted for high saving gaps and current account deficits of the economy.
Another important feature of North Cyprus economy is the dominant feature of non-tradable economic activities, and the novelty with this feature is that the economy has eventually become able to generate foreign exchange income, namely in TL, from non-tradable economic activities such as tourism related economic activities and higher education and other services.
The exports and final demand were two crucial components of growth. Due to insufficient private sector and domestic markets the public sector becomes, more important in generating final demand. But the fiscal stance of the economy in generating public-sector-driven economic growth would be the main concern in this regard. Exports, on the other hand, are another contributor to growth. However, economic and political embargoes seem to be the main disadvantage of the economy, restricting its ability to access the international markets, particularly to the European Union market. The removal of the embargoes in this respect would generate substantial economic growth for North Cyprus economy, and this should be considered as a pre-condition for eradicating the income gap between two sides of the island before reaching a peaceful settlement of the political dispute.
Another important issue is that the economic embargoes appeared to have been implemented asymmetrically on the external economic relationship of the economy, and despite various practical difficulties and high dependence on imports from Turkey the North Cyprus economy has access to international markets. The flow of imports from Turkey constitutes a crucial source of economic growth. However, a strict imposition of embargoes on imports would create drastically high output losses. The paper therefore implies that the economic embargoes have not been strictly imposed on the North Cyprus economy, but possess a significant impact on output growth. As a final point, the removal of the community’s isolation would generate not only economic growth for North Cyprus, but also generate hope for a peaceful settlement in the island.

References
Ghafoor,A. and V. Yorucu (2002). “Public expenditure and productivity puzzle: The case of Northern Cyprus”
Ayres, R. (2003), “The economic Costs of Separation: the North-South Development Gap in Cyprus”
Günçavdı, Ö. and S. Küçükçifçi, (2007), “The Sources for Economic Growth and Employment in the Turkish Republic of Northern Cyprus”…...

Similar Documents

Premium Essay

Economic Growth

... 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...

Words: 3844 - Pages: 16

Free Essay

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 are...

Words: 1777 - Pages: 8

Premium Essay

Economic Growth

...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

Premium Essay

Economic Growth

...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

Premium Essay

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

Premium Essay

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

Premium Essay

Foreign Direct Investment and Growth in Cyprus: a Causal Relationship

...FOREIGN DIRECT INVESTMENT AND GROWTH IN CYPRUS: A CAUSAL RELATIONSHIP N0373193 This research project is submitted in part-fulfilment of the degree of Bachelor of Arts (Honours) Economics, Finance and Banking Nottingham Business School Nottingham Trent University Summer 2014 Chosen Target Peer-Refereed Academic Journal: Journal of Internet Banking and Commerce, December 2011, vol. 16, no. 3 (http://www.arraydev.com/commerce/jibc/) Declaration: I declare that I have personally prepared this article and that it has not, in whole or in part, been submitted as an assessment for any other module, degree or qualification. The work described here is my own, carried out personally unless otherwise stated. All sources of information, including quotations, are acknowledged by means of appropriate referencing. I declare that this project has been conducted in accordance with Nottingham Trent University’s Regulations on Academic Irregularities, including those pertaining to research ethics and Data Protection legislation. Contents: PAGE Abstract 3 Abbreviations 4 List of Tables 5 List of Figures 5 1. Introduction ...

Words: 12309 - Pages: 50

Premium Essay

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

Premium Essay

Economic Growth

...Economic growth is the increasing capacity of an economy to satisfy the wants of its people. This is done by increasing the gross domestic product (GDP), which is what economic growth is measured by. However, economic growth is only good if it can be sustained. If growth is too quick, it is bad as it increases inflationary pressure. However, if the economy is growing too slowly or even contracting, then it is also bad as the unemployment rate will go up. This is why the government prefers to keep economic growth steady at around 4% p.a. Price stability is the avoidance of inflation and deflation. Inflation is the persistent and appreciable rise in the general level of prices and is measured by the consumer price index (CPI). Deflation is a general decline in prices. The RBA’s target range for inflation is 2-3% p.a. The objective of the government is to maintain low inflation. This is because high inflation can impact negatively on economic efficiency and the economic well-being of some people in the society. Full employment is when everyone who wants to work as a job. This is virtually impossible so the goal of government is to maintain a low level of unemployment. The unemployment rate is measured as a percentage of the workforce. A low unemployment rate is favourable as it means the economy is working efficiently and maximising its ability to produce while reducing the level of income inequality. The aim of external balance is to balance the external transactions between...

Words: 1595 - Pages: 7

Premium Essay

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

Premium Essay

Economic Growth

...A-LEVEL ECONOMICS ECON4/Unit 4: Mark scheme 2140 June 2014 Version 1.0 Final The National and International Economy Mark schemes are prepared by the Lead Assessment Writer and considered, together with the relevant questions, by a panel of subject teachers. This mark scheme includes any amendments made at the standardisation events which all associates participate in and is the scheme which was used by them in this examination. The standardisation process ensures that the mark scheme covers the students’ responses to questions and that every associate understands and applies it in the same correct way. As preparation for standardisation each associate analyses a number of students’ scripts: alternative answers not already covered by the mark scheme are discussed and legislated for. If, after the standardisation process, associates encounter unusual answers which have not been raised they are required to refer these to the Lead Assessment Writer. It must be stressed that a mark scheme is a working document, in many cases further developed and expanded on the basis of students’ reactions to a particular paper. Assumptions about future mark schemes on the basis of one year’s document should be avoided; whilst the guiding principles of assessment remain constant, details will change, depending on the content of a particular examination paper. Further copies of this Mark Scheme are available from aqa.org.uk Copyright © 2014 AQA and its licensors.......

Words: 7373 - Pages: 30

Premium Essay

Economics Growth

...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......

Words: 17789 - Pages: 72

Premium Essay

Economic Growth

...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 4.5 4.4 Southern Africa 3.6 2.7 3.1 3.5 West......

Words: 2461 - Pages: 10

Premium Essay

Economic Growth

...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, the more likely certain conditions will occur. His theory of economic backwardness contrasts Rostow’s stages of economic growth. According to him the more “economically backward” a country is, the faster industrial growth will take place on that country. Thought he explains backwardness in relation to capital, income per capita, literacy, savings and level of......

Words: 359 - Pages: 2

Premium Essay

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

The Happytime Murders (2018) 720p Telecharger french download | Bambine Animale Fumetto Fiocco Borsetta a Mano e da Spalla Messaggero Nice | 2x01 Los Nuestros