Chapter 66- Growing Economies Flashcards
How major economies are developing
UK has grown at 2.5% per annum and is classified as a developed economy, other countries will have a higher growth rates because they are developing from a lower starting point. These emerging countries are called BRICS and MINT.
These countries will develop their primary and secondary sectors and aim to export as much of these goods as they can but often faced with the problems of exporting to trading blocs like the EU and NAFTA. Many of these emerging economies have been hit by the negative economic consequences of the 2008 banking crisis.
China has also switched its focus from investing in its infrastructure to consumer led growth. Chinas growth rate has slowed to between 6-7%.Despite this china still exerts a dominant influence in South East Asia region, resorting to outsourcing to countries like Cambodia + Vietnam.
Benefits of economic growth:
• Higher life expectancy
• Improved educational opportunities
• Greater investment in infrastructure
• Improved health care/provision
• Improved housing
• Increased trade opportunities because
economic growth will result in increases of
aggregate demand.
• Employment opportunities- economic
growth= people will be able to seek
alternative employment as businesses will
take on more staff. Unemployment in some
countries will result in some businesses
having the opportunity to relocate there.
Drawbacks of economic growth:
- Pollution
- Unequal distribution of income/wealth
- Corruption
- Inflation
- Sustainability
Indicators of growth:
Info can be obtained from many sources such as World Bank etc. but must be cautious about using data from different sources. Figures showing same data could also be unreliable as GDP is calculated in different currencies.
- Gross Domestic Product (GDP) per capita- measure of economic activity, including all of the goods and services in the year, divided by the no. of people in the country.
- Purchasing power parity (PPP) - a measure of real growth that uses the price of purchasing a standardised basket of goods and services in order to compare prices across economies.
- Literacy Rate- % of adults (over 15) that can read + write. Use by businesses as they want to employ the most productive workforce at lowest price + will want to consider the consumers it will sell to + understand potential customers in order to know how to market goods + services.
Economic growth
An increase in a country’s productive capacity.
Health
As with educational attainment- the state of a country’s health is important for investors to consider. It is another key indicator of the level of development of an economy. An assessment of the health of a population may include:
- Life expectancy at birth
- Infant and maternal mortality
- Pollution exposure
- Access to clean water
Emerging economies
The economies of developing countries where there is rapid growth, but also significant risk.
Human Development Index (HDI)
A collection of statistics that are combined into an index, ranking countries according to their human development.
- The Human Development Index (HDI) is another widely used measure to show the state of global development
- The HDI has breadth, in it takes into account three important dimensions of the development process:
Life expectancy
Education
Economic growth
How could a business use the Human Development Index
- A business looking to expand might want to use the Human Development index to investigate a potential market or location for investment – a company that makes and sells products for the elderly would need to evaluate the life expectancy in a target country, to assess how many people might want to buy their products in the future.
- It would also want to try and match countries that have the longest life expectancy to those that have high levels of GNI, as to ensure that their potential customers could actually afford their products.
