Income & Poverty
Introduction
Economic consequences are extremely effective and essential for an economy; in fact the current world is like examining the effectiveness of the economies in terms of their economic power and effectiveness. Those economies that have a strong command over the economic consequences are more productive and effective as compared to those economies that have and strong command on the economic indicators (Basedow and Kono, p.34).
Both Micro and Macroeconomics are essential for the sake of an economy, as both of them talks about the real growth of the economy and its economic consequences. Micro means the branch of economics that specifically attached with the economics of the individuals, while macroeconomics related with the economy of the country as a whole. After the current economic crisis, there were number of countries which eventually emerged as the fastest economies of the world, and among them there is a name of India, China, Brazil and Russia are some of them. The amalgamation of these four economies raised a name of BRIC in the financial world (Dorfman, Samuelson and Solow, p.78).
In this assignment, it is required to compare and contrast the economic consequences of different emerging and developed economies, by analyzing their current demographics and development indicators. The countries which have been taken into consideration for the same analysis are United States, Canada, China and India. There are two different parts of the assignment; one is to complete the economic indicators assignment trough the World Bank’s issued data, while second one is to analyze the provision between income and equality. Both of the things should have been answered accordingly by emphasizing on them simultaneously. It is also required to use sophisticated economic models on the first part of the assignment.
Analysis and Findings
Assignment-1/Part-1
It is required in this part of the assignment is to analyze the trends and development indicators of some of the major economies of the world. The names of the countries selected for the same is United States, Canada, China and India (Hampus-Lyttkens, p.89). There are certain points that needed to be complete in this assignment that bifurcated into different sections particularly.
- Gross Domestic Product Analysis
The monetary value of all the finished goods and services that produced within a country in a single year of time period is known as Gross Domestic Product (GDP). It is usually calculated on the year basis, and the provision of the same is more than essential for the economic growth of an economy. There are four different elements that specifically found under the net of GDP, known as Consumption, Government Spending, Investment and net exports. A country with high GDP is essential for the economic consequences in particular. In this part, it is required to compare the GDP of United States (US) with India and China (Demographics analysis Canada & India, p.67).
- Current US$ GDP of the United States in the year 2013 was US$ 16,244 billion
- GDP Per Capita of the United States in the year 2013 was $ 45,341
- GDP Per Capita PPP of the United States in the year 2013 was $ 50,865
- GDP Per Capita income is the amount distributed among every single individual of the country subjected to the current amount of the Gross Domestic Product of the Country, while GDP Per Capita PPP is a term that determines the value of the individuals with relative values of different currencies. The basic difference among those numbers is the currency value, that the nationals of the United States have high amount of purchasing power while goes to other country
- The method of Purchasing Power Parity (PPP) is providing higher estimates for India and China as compared to its current GDP because the economic consequences of these countries are increasing tremendously well as compared to other countries operated in the same line of economy. The economic power is now towards betterment, and it reflects high estimates for both of the countries in terms of Purchasing Power Parity (PPP).
- Birth Rate
Birth rate and death rate examines the management and level of efficacy of an economy as far as managing their economic consequences in a perfect and organized manner. It is required to differentiate among India and China with their Birth and Death rate.
Birth Rate Canada per 1000 in 2013 was 10.29/1,000
Death Rate India per 1000 in 2013 was 7.4/1,000
Death Rate Canada per 1000 in 2013 was 8.31/1,000
Population Growth Rate of India = 1.51%
Population Growth rate of Canada = 0.76%
- Harrod-Domar Growth Model
The Harrod-Domar Growth model is an early model of Keynes, and known as Keynesian model of economic prosperity and growth (Schumpeter et al., p.90). It is often used to explain the economic growth rate in terms of the savings of the country. This is one of the best models that will be used for the economic growth of the countries. It is required to analyze the GDP Growth and Gross Savings of all of these countries
The relationship among the saving rate and economic growth is high and effective, and it can easily judge from the above mentioned table and chart. The growth rate of India and China in the financial year (2013) was remarkable, and they have high saving rate as well, unlikely with the saving rates of the United States and Canada. The saving rates of these economies are low; hence, the GDP growth rate is also quite low. It can be said that the relationship among the saving rate and GDP Growth rate is positive and effective, and the model of Harrod-Domar is absolutely fine and effective at the same time.
- Solow Growth Model
The Solow Growth Model which also known as an exogenous growth model is used for analyzing the long run economic growth of an economy in order to set the framework of the neoclassical economics (Posner and Parisi, p,89). It basically strides under the effectiveness of capital accumulation, labor of the population growth, and an increment in the productivity. It is often associated with the technological advancement and technological progress in particular. In this part, the capital formation of the selected countries would be analyzed accordingly to complete (Economic Indicators Analysis, p.56).
Solow Growth model analyzed that the economies which are effective in arranging of capital in higher concession would be more productive and effective as compared to those economies which are not. Capital Formation of the United States is the highest as compared to other countries in terms of their current GDP. Due to their high gross formation against their GDP, the capital formation of the country is increasing heavily in the annual growth of the country. All of the countries have effective capital formation percentage to their current GDP, which is a sign that the economic consequences of these countries are essential and effective at the same time. The Solow growth model is looking forward on the same thing to accumulate the capital formation for the countries.
- Industry Value Added and Agriculture Value Added
The measure that analyzes the power of the industries of the country in terms of the economic growth of an economy is known as Industrial Value Added and the Agriculture Value Added. It is an obvious fact that industries and agriculture are some of the important parts of an economy, and the proportion of the same would be essential and effective for the growth of the economies (Shavell, p.102). There are number of countries of the world wherein the stance and promotion of Industries in their value addition and proposition is highly competitive and effective, and among these countries or economies the name of India and China are some of them. Pakistan also has a great name in the agriculture markets. The proportion of industry value added and Agriculture Value Added are as follows
- Exports and Imports % of GDP
The provision of exports and imports can be extremely effective and powerful for the sake of an economy (Shavell, p.102). An economy with high exports is more economically viable and effective as compared to the economies which have fewer exports in particular. Export is the name of goods exported to some other countries, while important is about to important the goods in the origin country. Though both of provisions are significant for the economic growth of a country, however net exports (exports – imports) would become a part of the formula of GDP (Export, Import, Value Added Information, p.34). The exports and imports percentage to GDP of these four countries are as follows
The countries which have high imports then its exports are less economically viable, because it increases the stance of balance of payment (BOP) and Current Account Deficit. There are certain aspects that deem essential for the sake of the economies. From the above mentioned table, it is found that China is the only country out of these four ones which have positive net exports that accounts for positive balance of payment for the economy. The value of the current account of the company is in surplus, while it is in deficit for United States (US), Canada and India. All of these countries which have negative net exports have to work extremely hard to decrease their deficit and decreases the core pressure from the country accordingly. The trade policies of all of these countries are effective, but due to the current economic crisis the economy of the United States and Canada are still under severe pressure. It requires time to both of these countries to mobilize their earnings soon again. On the other hand, the trade policy of India is not as viable and effective, because of tension among their counterparts like Pakistan and China. Both of these countries are very rich in agriculture and other goods, but the level of trade agreement of these countries with India are not effective, due to which the net exports of the country is in the negative figures.
Part-2
- Scatter Plot
Poverty Line is not an effective sign for the companies all over the world, and there are numerous countries in the world which are actually below the poverty line. According to the World Bank report, there are billions of people across the globes which are currently living below the poverty line of $ 1.25. The percentages of these people are as follows
It is clearly seen in this analysis that India is a third world country which has a high percentage of people living below the poverty line of US$ 1.25 a day, while it is second highest in China with a percentage of 18.60%.
Relation between Per Capita Income and Poverty
There are number of things and aspects that specifically come under the ambit of Economics, and its management which are always be effective for the economies in particular. Economic indicators are some of the things through which the economic consequences of a country can be analyzed accordingly. Among numerous concepts that stride under economics, the name of per capita and poverty are some of them. Per Capita income is an important measure that analyzes the financial strength of an economy, as it analyzes the distribution of economy among every single nation in particular (Shavell, p.102).
It can say that per capita income has a direct and important relationship with the poverty of a country, because a country with low per capita income is an evident that the distribution of economy is not effective in the country, and the chance of ineffectiveness and inequality is high in the country. It is found in some of the third world countries of the world, wherein rich people are becoming richer and richer each day, while poor is getting in severe plunge with the passage of time. There are no countries which have low poverty even though they are poor, and in the same consequences there are no countries in the world which have high poverty rate in relative to have high per capita income as well. Per capita is the name of accumulation and distribution of money to every single person in the same manner; however it is not the case that entrepreneurs would have the same amount of income level as of their employees. Countries which have high per capita income resultantly have low poverty rate, and the example has just mentioned in the above mentioned section, wherein economies like the United States (US) and Canada which have the highest amount of per capita income has the lowest amount of poverty rate, unlikely the figures of China and India. These countries are telling us two things. Firstly, there is a need to increase the per capita income of the country in which every single person will get equality in income distribution. Secondly, there should be a perfect check and balance over the income distribution among every single individual of the country regardless with the fact of racism and other aspects. From this entire aspect, it can be said that government of the respective countries should play their parts to overcome on these challenges and problems accordingly and effectively. The name of China and India can be taken in this provision because the proportion of inequality found heavily in both of these countries of the world.
Conclusion
Apart from Adam Smith and Alfred Marshal, there are hundreds of authors and economists who actually analyze the importance of this subject for the best possible mean for an economy. It is known as a subject that found effective with almost every walk of life. There are two important parts of economics known as microeconomics and macroeconomics. Both of these parts are essential and effective for this subject. The provision of economic indicators that come under the provision of macroeconomics has its own significance used for analyzing the indication of the countries. There are two important parts of this assignment that needed to be complete, in which one part specifically related to the World Bank data and analysis, while the other part is all about answering a short question about the income and equality accordingly. From this entire analysis, it is found that India and China are two emerging economies of the world, which have exceptional GDP growth rate, but these countries still need ramifications and suggestion regarding their income distributions and spreading of income equality, as these things are not in the favor of these economies that needed to be change as soon as possible.
Work Cited
Basedow, Jürgen, and Toshiyuki Kono. An Economic Analysis Of Private International Law. Tübingen: Mohr Siebeck, 2006. Print.
Dorfman, Robert, Paul A Samuelson, and Robert M Solow. Linear Programming And Economic Analysis. New York: McGraw-Hill, 1958. Print.
Demographics analysis Canada & India, [Online], retrieved from http://www.indexmundi.com/canada/demographics_profile.html , Accessed on 2014-Oct-24th (2013)
Economic Indicators Analysis, [Online], retrieved from www.tradingeconomics.com , Accessed on 2014-Oct-24th (2013)
Export, Import, Value Added Information, [Online], retrieved from http://data.worldbank.org/indicator/NV.IND.TOTL.ZS , Accessed on 2014-Oct-24th (2013)
Hampus-Lyttkens, Carl. Economic Analysis Of Institutional Change In Ancient Greece. New York: Routledge, 2012. Print.
Posner, Richard A, and Francesco Parisi. The Economics Of Private Law. Cheltenham: E. Elgar, 2001. Print.
Schumpeter, Joseph A et al. The Entrepreneur. Stanford, California: Stanford University Press, 2011. Print.
Shavell, Steven. Foundations Of Economic Analysis Of Law. Cambridge, Mass.: Belknap Press of Harvard University Press, 2004. Print.
