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Essay on the Economic Development of a Country

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❶Keynes argued that the economy needed expansionary fiscal policy.

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The United States economy was greatly enhanced by the development of car industries which was among the first industries which lacked in Europe. The high sales by car industry enhanced the growth of the United States economy by over twenty five percent. In fact, by , almost every adult American owned a car.

The increased rate of industrial growth and high supply of the resources resulted to heavy productions which exceeded the rate of demand within the United States. As a result, much of the industrial products lacked market and thus remained unsold. On the other hand, in order to protect home industries, Europe enacted policies which laid high import duties on American products.

These led to a lot of the products been wasted causing heavy losses on the industries. Most investors were forced to close down their investments leading to high rate of unemployment in the United States. Most products kept falling in the stock market as a result. The United States ministry of finance as well failed to ensure strict control of funds in circulation. The aggregate national GDP were used as the dependent variable while the explanatory variables included labor, gross capital stock, and capital stock of various government expenditures.

Results showed that the various types of government spending have different impact on economic growth. In Africa, government spending in human capital was particularly strong in promoting economic growth. In Asia, capital, agriculture, and education expenditure promotes economic growth. In Latin America, none of the government spending items has any significant impact on economic growth. The main question that will be answered: This will be achieved by answering the following sub-questions:.

The main objective of the study will be to analyze the impact of government expenditures as a total and its components on the Palestinian economic growth. Moreover, the specific goals to be achieved are:. The Importance of the Study:. However, government expenditures and taxes are two tools of fiscal policies that can be used to achieve the desired economic growth in Palestine. Government expenditures are more controlled by the Palestinian authorities, which give them the preference over the other instruments of fiscal policy in this study.

Since part of the taxes are under the control of the Israeli authorities in certain circumstances and up to certain levels, the recommendations that will come out of this study will be more effective in the case of government expenditures rather than taxes.

This study will be directly addressed to the Palestinian policy makers, mainly the Ministry of Finance. This study will help the policy makers in the Ministry of Finance to take into their consideration the effect of the government expenditures on the economic growth when they formulate and create the Palestinian Authority budget.

This will make the budget more effective and the Palestinian resources will be allocated in a more efficient and productive way. This study will also be very helpful to the Ministry of Planning in setting up the social, economical, financial and political plans that would enhance the overall performance of the country in the previously mentioned fields.

Since there is a direct relationship between GDP and unemployment rate, this fiscal policy instrument will be very helpful for Ministry of Labor in preparing its annual strategies in decreasing the unemployment rates.

In addition, this study will benefit the Ministry of National Economy in choosing the projects that should be given licenses, in particular, the ones that enhance the economy growth the most.

In addition, this will help the individuals as being part of the labor force to determine how and where to invest their money so as to help in achieving better GDP growth. This study will be analyzing the impact of government expenditures as a total and its components on the economic growth in Palestine It will have an important limitation, which will be the shortness of the time series that will be taken in analyzing the impact of the government expenditures on the GDP.

The time series coverage will be since the Palestinian Authority was established in as a result of the Oslo Accords between the Palestine Liberation Organization and Israel. The study will be based on secondary annual data of total government expenditures and its components from the Ministry of Finance whereas the GDP, capital estimated using the ICOR approach and employment to be taken from the Palestinian Central Bureau of Statistics.

This study will be consisting of two models. The dependent variable of the first model will be the GDP whereas the independent variables will be capital, labor force, technology and total government expenditures Mohammadi, Maleki and Gashti As for the second model GDP will be the dependent variable while labor, capital, technology and the components of government expenditures will be the independent variables Bader, According to the Ministry of Finance government expenditures in Palestine are divided into four types; expenditures on wages and salaries, non- wage expenditures, net lending and development expenditures.

These four types will form the independent variables of the second model. The stationarity of the two models will be first tested using Augmented Dickey-Fuller and Phillips-Perron unit root test for stationarity. Then the impact of government expenditures as a total and its components on the GDP will be examined using multiple regression analysis where the R2, F-test and t- test will be calculated. Wages and salaries expenditures.

This study will consist of five chapters. Chapter one will contain seven sections: Chapter two will outline the theoretical background and a literature review of previous studies that have the same problem of this study.

Chapter three will be a detailed descriptive analysis of the data on the variables of interest focusing on the allocation of the government expenditures.

Chapter four will be analyzing the data statistically. It will contain detailed description of the methodology of the study with the models to be estimated addressed in functional forms using symbols representing the dependent variable along with the independent variables.

If this occurs it may contribute to wage-inflation. Posted by Tejvan Pettinger at 1: Wednesday, November 1, Importance of Economic Growth. Economic growth means a rise in real GDP; effectively this means a rise in national income, national output and total expenditure.

Economic growth should enable a rise in living standards and greater consumption of goods and services. Some also argue we should not be using GDP but, a happiness index.

Why economic growth is important Economic growth can help various macroeconomic objectives Reduction in poverty. Increased national output means households can enjoy more goods and services. For countries with significant levels of poverty, economic growth can enable vastly improved living standards. Economic growth is particularly important in developing economies.

A stagnant economy leads to higher rates of unemployment and the consequent social misery. Economic growth leads to higher demand and firms are likely to increase employment.

Higher economic growth leads to higher tax revenues even with tax rates staying the same. With higher growth, incomes and profit, the government will receive more income tax, corporation tax and expenditure taxes. The government can then spend more on public services. Reduced debt to GDP ratios. Economic growth helps reduce debt to GDP ratios.

Elected politicians have a vested interest in higher economic growth. Virtuous cycle of economic growth. Posted by Tejvan Pettinger at Saturday, October 21, Liquidity Trap Explained. In the post-war period, the macro-economy was managed by changing interest rates and there was no incidence of a liquidity trap outside Japan.

However, in , the global credit crunch caused widespread financial disruption, a fall in the money supply and serious economic recession.

Yet, for a considerable time, the economy remained in recession and growth remained weak. This period is a good example of a liquidity trap. Interest rate cuts to 0. Money Supply Growth in Liquidity Trap A feature of a liquidity trap is that increasing the money supply has little effect on boosting demand. One reason is that increasing the money supply has no effect on reducing interest rates.

In the liquidity trap, there was an increase in the monetary base due to Quantitative easing but the broad money supply M4 showed little increase. Inelastic demand for investment. In a liquidity trap, firms are not tempted by lower interest rates. The marginal efficiency of capital indicates the rate of return from investment. Usually, lower interest rates make it more profitable to borrow and invest.

Posted by Tejvan Pettinger at 2: Wednesday, October 11, Interest Rates explained. Interest rates reflect the cost of borrowing. The most important factors are. But Bank has to consider other objectives such as economic growth and inflation. It also has to consider the type of inflation. Is it temporary cost-push inflation or underlying inflationary pressures. Is the economy reaching full capacity?

Example of interest rate dilemma Nov Thursday, October 5, The Economy of the s. See previous decade - s. The s was not just an era of dayglow trousers, lava lamps and the emergence of punk rock. It was a traumatic economic decade of stagflation , a three day week and the return of unemployment. Yet, despite some headline-grabbing crisis - it was also a decade of rising living standards, the growth of credit and rising property prices.

Saturday, June 17, The Importance of Economics. What is the Importance of Economics? Economics is concerned with helping individuals and society decide on the optimal allocation of our limited resources.

The fundamental problem of economics is said to be scarcity - the idea that wants demand is greater than the resources we have. The economy faces choices on What to produce? For whom to produce? More specific questions include How to manage the macro economy? Mass unemployment in the s. Policies to reduce unemployment Policies to reduce inflation. If economics can contribute to reducing unemployment, then it can make a significant improvement to economic welfare.

However, the problem is that economists may often disagree on the best solution to these challenges. For example, at the start of the great depression in , leading economists in the UK Treasury suggested that the UK needed to balance the budget; i.

But, this made the recession deeper and led to a fall in demand. He argued that classical economics had the wrong approach for dealing with depressions. Keynes argued that the economy needed expansionary fiscal policy. Overcoming Market Failure Market failure - stuck in traffic jam, breathing car fumes. The over production of negative externalities e. Non-provision of Public Goods - national defence, law and order. Tax negative externalities Subsidise public services like health care and education.

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Free Economy papers, essays, and research papers. The Downward Sprial of the United States Economy - The Downward Spiral of the United States Economy In the world to date, there seems to be an increase of world governments needing bailouts, and .

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Economic growth may conflict with the environment. e.g. increased carbon production is leading to global warming. Economic growth may bring benefits in the short-term, but costs in the long-term. Economic growth may bring benefits in the short-term, but costs in the long-term. Dissertation and Essay Samples:An overview of US economy America. The following essay or dissertation on the topic of America has been submitted by a student so that it may help you with your research work and dissertation help.

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Free Essay: During the mid nineteenth century humanity experienced one of the most profound changes it had ever encountered, the Industrial Revolution. Not. [tags: United States Economy] Powerful Essays words | ( pages) | Preview. The Decline of American Economics - There is no doubt that the only surviving socio-economic system prevailing is the free economy system which generated fast economic growth and prosperity albeit often ignoring social injustices along the way. This capitalistic.