Basic Economics

Topics: Inflation, Supply and demand, Economics Pages: 28 (7250 words) Published: September 29, 2013
Balance of payment (page 161)

Visible and invisible trade:
Goods and services which are sold overseas are called EXPORTS. Those which are bought from other countries are called imports. Economies distinguish between visible trade and invisible trade.

Visible trade: buying and selling of physical goods
Invisible trade: exchange of services such as e-commerce and credit sales.

Balance of trade: visible exports - visible imports

Balance of payments: a BOP is a record of all transactions relating to international trade.

Current account: shows a value of all imports and exports over a period of time.

Capital account: records flows of money into and out of a country resulting from transactions relating to savings investments and speculations.

Economic Growth

An increase in the capacity of an economy to produce goods and services, compared from one period of time to another. Economic growth can be measured in nominal terms, which include inflation, or in real terms, which are adjusted for inflation.

Economics growth refers to an increase in the real GDP or GNP per capita in a country in a given period of time. It can be shown by the outward movement of the PPC or any movement from inside the PPC to the curve.

There are two ways in which economic growth can happen:

1. A country have many people out of work and much capital and land not being used. If these resources are put to work GDP will increase. This is know as short run growth.

2. Even when all resources are fully employed. However, economic growth is still possible. Increases in the suppllies of labour and capital and increase in the efficiency with which economic resources are being used, will lead to increase in total output. This is known as long run growth


1. Investment in human capital: education and training are often called 'investment in people' or 'human capital' . By improving the quality and quantity of workers in a country, the country can experience economic growth. A more skilled, knowledgable and healthy worker or workforce will be able to produce more or better goods and services. The government will set up more training and re-training centers and also improve the healthcare system to achieve this objective.

2. Technical Progress: It depends on research and development, technical knowledge, methods of production, management techniques and so on. With a consistent technological progress in a country, the productivity of labors and firms will increase consistently. Technological improvement also means introduction of new products and better way of producing goods. Therefore the government will encourage research and development by funding or sponsoring universities and colleges to do more reasearch.

3. Reallocation of resources: As the country develops, resources are moved from primary to secondary or secondary to tertiary where large firm increase in output. In a changing world, a country's rate of growth depends very much on it's willingness and ability to shift it'd economic resources from declining and low growth industries to industries which have high prospects of growth. By increasing the mobility of resources from declining industries which have better prospects of growth can lead to economic growth.

4. Discovery of new resources: One major reason for economic growth in a county's is the discovery of more natural resources such as coal, oil, gas, gold, variety of fruit, etc would help any country to increase its output. When new resources are discovered, the industries in that country will grow especially oil and gas like in Malaysia where it led to growth of petroleum industries and also other related industries.

5. Investment and capital: It is the key to growth because when more capital goods like machines, factories will increase the productivity of the country which will increase the GDP and economic growth. Providing the workers more machineries and...
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