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    8 views24 pages

    Contemporary Issues of Research in Applied Economics

    Uploaded by

    Ihsan Ullah Himmat

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    © All Rights Reserved
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    of 24
    ' of Research in Applied Fons What Is an Economy? = luction, consumption, and distribution of goods and services combine to fulfill the needs of those living and operating within the KEY POINT + An economy is a system of inter-related production and consumption activities that “ultimately determine the allocation of resources within a group, ‘Types of Economies 1s the modem world, few nations are purely market-based or purely command-based. But most lean toward one othe other ofthese model Te) Market-Based Econo Mark economics allow people and businesses to fiely exchange goods and services according to supply and demand ommand-Based Economies ‘Command-based economies depend on a central government that controls the production levels, pricing, and distribution of goods, “3. Mixed Economies Pure market economies rately exist in the modem world since there's usually some degree of ‘government intervention or central planning, Even the United States could be considered a mixed economy. “dy Studying Economies ‘The study of economies and the factors affecting economies is called economies. The discipline ly fof economics can be broken into two major areas of focus, microeconomics, and |: Microeconomics | Macroeconomics ‘As the name implies, macroeconomics studies the big picture Macroeconomics includes the study of economye-wide fictorssuch as the‘effec of Hsing prICeS “or inflation on the economy Understanding Applied Eeon ie! + Business leaders and managers can draw on the lessons from applied economics to make them better managers. Applied Economics Definitions: y, and Econ nic Growth GF Definition: 1s ean It can be represented by a rightward shift that is seen in the production possibility frontier. Economie growth also causes a shift in the Long Run Aggregate Supply curve. in some cases, economic growth can also be determined by a change in the GDP or the Gross Domestic Product of a country Q Types of Growth in Economy Generally, there a ‘of growth that take place in an economy. 1 is the change in GDP that happens over a certain period of time. Actual _Browth is potentially affected by a change that takes place in the efficiency of resources as well as the aggregate demand in the economy. 2, ‘can be defined as the rise in the quality and quantity of all the resources that are present in the economy. Potential growth could take place without having actual economic growth, 3. ‘can be defined as the inerease that is expected to happen in the potential ‘output over a certain period of time. It can basically be used to determine the growing capacity of the soon without the consideration of inflation, ‘There are some economic growth determinants that decide how economic growth experiences cchange in a nation, ‘There are a few factors that decide the economic growth et ‘With proper supply in the economy, consumers are able to spend more mor tha significant ts in machinery, factories, and equipment, the economy of a nation can be developed. When a business firm decides 10 make some investment in new ‘machinery, the potential output will experience an increase. This will lead to stable economic growth, 3. With the increased amount of labour, there will be more economie growth, ‘ith more workers, the potential level of output will also experience an increase as well. Besides the quantity of labour, the abilities and skills are also pretty important. 4, y. Fits will eventually increase their investments if they are confident about the return rates on the investments. With more planned investments, the economy will also experience growth. This is due to the fact that the addition of some capital stock in the economy of a country will be used to produce better services and goods. If the consumers tend to have more confidence regarding the future, they will also increase the rates of consumption and hence spend more on the economy. sy iese goods and services will also have low prices and costs attached to them when compared to the countries that have to import these resources. With low costs, the ‘companies and firms will be able to increase the output and hence export more goods to other nations. This will lead to an increase in the current account ofthe country and hence will quicken up the slow economic growth, Impact of Economic Growth on Business ‘When it comes tothe impact of economic growth on businesses these days, there area lot of factors to be taken into consideration, Ben onan rine rng suas onan avg ot x pln prune fre pein come Di sec cae eh cite we ae gree ete ee “Increase in capital investment innovations. ep Technologi © Factors influencing Economie Growth |. AGRRRTFESOMFEes — this is a major factor that is responsible for boosting the economic [powth of « councy, Tho rat of increae in th ll end ceblides st a erkobe ily nes ete pend of com Improvements and ineeasd investment in physical capital machinery, and factories wil inrease the efficiency of economic ut ip eta sank such as roadway 3 's— Proper use of available natural resources like ‘mineral deposits helps boost the productivity of the economy. 4, ~ An inerease in the growth of the population will result in the availability of more human resources which in turn will inerease the output in terms of ‘quantity. This is also an important factor that influences economic growth 5. Improvement in technology will affect the economi growth of a country positively. The application of advanced technology will result in increased productivity of labor and economic growth will advance ata lower cost, 0 Development Economies Concept: ‘The field also examines both macroeconomic and microeconomic factors relating to the structure ‘of developing economies and domestic and interational economic growth @ Definition: Scone hacen teseccO EN. eS NEES ‘ansssedatofineome. Heer, ede eq. can beaded n developed counts or the developed economy. @ KEY PINT: a « a Pescomen:comomics forues on ince beh, cduaton, working condition, and market conditions + Development economics: seeks to understand and shape-macro_and-mieroseonomic ‘POESn order to li poor counties out of poverty. +The application of development ceonomics is complex and varied asthe cultural, social, and economic frameworks of every nation sdferent + Four common theories of development economics include mercantilism, nationalist, the linear stages of growth mode, and structurl-change theory. P ypes of Development Economies 1. Mercantilism — practices to promote the success of a mation. It was vieerest eos ine eee Europe from the 16th to the 18th centuries. The theory promoted a lowering exposure to rival national powers. Like political absolutism renting state power by 1d absolute monarchies, mercamtlism promoted government regulation by prohibiting colonies from transacting with othe 2. Beonomic Nationalis restricts the movement of capital, goods, and labor Economic nationalists do not generally agree with the benefits of globalization and unlimited free trade. They focus on a policy that is isolationist so thatthe industries within a nation are able to grow without the threat of competition from established companies in other eountries, 3. Linear Stages of Growth Model ‘The linear stages of growth model was used to revitalize the European economy after World War 0, This model states that economic growth can only stem from indusisiztion. The model also agrees that local institutions and socal attudes can retit growth if thse factors influence peopl saya aes and investments. 4. Structural-ChangeTheory rypes of Regional Planning Instruction: Slat with a definition of Regional Planing Planning may of following Types + ScotumabBlanningy raat gi nig 1 ing: [ts part of National Planning along with Sectoral and Global Planning. All three are interelated field of National Planning, Through inter rewional planning, the planner try t solve: The problems of allocations of tasks and means of every region of the country b. It also aims at outlining the role of cach region in the formulation and {implementation of national objectives 2, t@FTSEAI Planning: There is an important difference in scale between interregional and interlocal planning. Interregional planning is activities at national level while the inter: Focal at the regional level 3. ing: Interregional and Intcr-local Planning activities are considered as ‘explicit spatial dimensions of the planning system, Infrastructural development and Importance public utilities, transportation systems, communication networks, energy sources, and other essential infastructure that supports economic activity and improves the quality of life for peopl. (© rwenwaprtaee oF infrastructural development: + Beomomie: growth: conomic growth by providing esscnia facilities for businesses to operate, expanding accesso markets, and facilitating the movement of goods and services © (obyicreation: The construction and maintenance of infrastructure create job epportunities, which stimulate local economies and reduce unemployment + Amprovedstiving’standards: Access 10 quality infasructure services such as healthcare, education, water, and sanitation, and eleccty enhances living standards and the overall well-being of individuals + Environmentalsustainabilty: The development of sustainable infrastructure Promotes the efficient use of resources and helps to mitigate the environmental impact of economic atvities. ‘+ (Regional integration Infrastructure development can enhance regional integration by improving connectivity, feeiltating cross-border trade, and promoting social and caltucal exchanges infrastructure development plays a critical role in promoting Here are some of the gypESOTTnrastretUFat AEVOBREREN: 1. ‘Tealisportationtntrastructure) This includes the development of eoadsiigee” ‘tumor pons apers enor penipomiomianaatcsy for the movement of goods and people ‘Uae rinalings a iransenisSiOn, and distribution of electricity, gas, and other forms of energy. 4 This includes the ion "ctwoks, suchas telephone and inte servis and support economic activities, ‘5S. Secfa}"Thtvastmeturer"This includes the "Industrial Infrastrueture: This includes the n Banking system its 1. Commercial Banks: These banks provide a range of financial services to individuals and businesses, inching checking and savings accounts, loans, and ereit cards 2. Investment Banks: These banks focus on providing financial advisory services and underwriting for corporate cients 3. ‘Central Banks: These banks are responsible for implementing monetary policy, regulating the financial system, and providing financial services tothe government. ‘Credit Unione: These ae member-owned financial cooperatives tht offer a range of financial services to members. s : These institutions specialize in providing home mortgage loans Why Banking system is crucial: @ 1. aciltates the flow of funds: The banking system provides a mechanism for the transfer offunds between savers and borrowers. This facilitates investment, consumption, and other economic ative, 2. Provides financial services: Banks offer a range of financial serviees, including checking and savings accounts, loans, and credit cards, which are essential for individuals and businesses to manage their finances. 3. Promotes economic growth; The banking system plays a critical role in promoting cconomie growth by providing access to capital for businesses and individals, 4 — 4 ty: A well-functioning banking system promotes financial Stability by mitigating the risks associated with financial transactions. 5 EET! banks use the banking system to implement monet tary Policy, which can influence economic growth, inflation, and other economic indicators In conclusion, the Gi Financial s ‘The financial system plays a critical role in the economy by allocating capital, managing risk, ‘and facilitating economic activity, Dr vpes of Financial institutions! system: |. BankSThese institutions accept deposits from customers and use those funds to make Joans to individuals and businesses 2 8: These firms provide financial advisory services and invest in a range ‘of financial instruments, including stocks, bonds, and derivatives {nsuance’ Companies: These companies provide insurance policies to individuals and businesses to manage risk 4. Penson Funde ‘These finds manage reiement savings on behalf finda and invest na range of fnancl insert B Theimpertance of the ranca system 1 Capital Allocation: The financial sytem fcitats the allocation of capital o Productive uses, such as funding investment projects or providing working capital for Dusinesses. 2. Rikivanageem The anise prvi mss fr man wough insurance policies, hed 3 fing risk, strategies, and other financial instruments, ‘The financial system supports economic activity by providing access to capital for individuals and businesses. A well-funetioning financial system promotes financial stability by mitigating the risks associated with nana transactions |} promote eonomic growth and development by fitting the transfer of funds between savers and borrows. 2 /. playing a crucial role inallocating apita, siting economicnsiviy is made wp ofa network of institutions, markets, and instruments, cach with a unique role in promoting economic ows and development {() iat onctary Poe? ich as revising interest rates and changing bank reserve requirements. @ Kev vows EEE Monetary policy strateyies include revising interest rates and changing bank reserve requirements. + Monetary policy is commonly classified as cther expansionary or contractionary. + The Fedral Reserve commonly uses three strategies for monetary policy including reserve requirements, the discount rate and open market operations. (QO Understanding Monetary Potiey _by which new money is supplied. Economic statistics such as gross domestic product (GDP), the rate of inflation, and industry and sector-speeifie growth rates influence monetary policy strategy. A central bank may revise the interest rates it charges to loan money to the nation’s banks. As rates rise or fll, financial institutions adjust rates for their customers such as businesses or home buyers. ‘Types of Monetary Policy “Monetary policies are seen as either expansionary or contractionary depending on the level of growth or stagnation within the economy. ey ‘A contractionary policy inereases interest rates and limits the outstanding money supply to slow {growth and decrease inflation, where the prices of goods and services in an economy rise and reduce the purchasing power of money. 64, ——? —— <7 uring times of slowdown or a recession, an expansionary policy grows economic activity. By lowering interest rates, saving becomes less attractive, and consumer spending and borrowing, Goals of Monetary Policy ee ee a exchange, Below are certain points of difference between the Money and Teal policy” Monetary Policy Definition Iisa financial tool that is used by the central banks in regulating the flow of money and the interest rates in an economy Managed By Central Bank of an economy Measur Tt measures the interest rates applicable for lending ‘money in the economy Focus Area Stability of an economy Impact on Exchange rates Exchange rates improve when there is higher interest rates Targets Monetary policy targets inflation in an economy Impact Monetary policy has an impact on the borrowing in ‘an economy Fiscal Policy It is a financial tool that is used by the central government in managing tax revenues and policies related to expenditure for the benefit of the economy yee of an economy Tt measures the capital expenditure and taxes of an ‘economy Growth of an economy thas no impact on the exchange rates Fiscal policy does not have any specific target Fiscal policy has an impact on the budget deficit services, employment, inflation, and economic growth, During a recession, the government may lower tax rates or inetease spending to encourage demand and spur economic activity. Conversely, to combat inflation, it may ruse rates or cut spending to coo! down the economy Fiscal policy is often contrasted with monetary policy, which is enacted by central bankers and not elected government officials, @ key TaKEAWays + Fiscal policy refers to the use of govemment spending and tax policies to + Keynes argued that “en ‘could stabilize the business —— regulate economic ‘output rather than let markets right themselves alone, Oe ne Understanding Fiscal Policy USS. fiscal policy is largely based on the ideas of British economist John Maynard Keynes (1883- 1946), He argued that economic recessions are due to a deficiency in the consumer spending and business investment components of aggregate demand. Keynes believed that governments could stabilize the business cycle and regulate economic ‘output by adjusting spending and tax policies to make up for the shortfalls of the private sector. 1 eC ‘Types of Fiscal Policies 1. Expansionary Policy and Tools To illustrate how the government can use fiscal policy to affect the economy, consider an ‘The government might issue tax stimulus rebates to Increase aggregate demand and fuel economic growth, ‘The logic behind this approach is that when people pay lower taxes, they have more money to spend or invest, which fuels higher demand, That demand leads firms to hire more, decreasing unemployment, and causing fierce competition for labor. In turn, this serves to raise ‘wages and provide consumers with more income to spend and invest, It's a virtuous cycle ositive feedback loo, 2 In the face of mounting inflation and other expansionary symptoms, a government can pursue ccontractionary fiscal policy, perhaps even to the extent of inducing a brief recession in order to restore balance to the economic cycle. ‘The government does this by increasing taxes, reducing publie spending, and cutting public sector pay or jobs. suanar financial sector is that segment of a national cconomy which Ss flow of capi Introduction: to Financial Sector Reforms The constituents ofthe financial sector ae banks financial institutions financial instruments and markets which mobilize the resources from surplus sector and channelize the same to the different needy sectors in the economy. Financial sector reforms have long been regarded as an important part of agenda for policy reforms in developing countries . Objective of Financial sector reforms 1. The main objective of the financial sector reforms is to ‘straints in the operation of banking sector, restructuring, recapitalization in the competitive element inthe market through the entry of new banks, 4. ‘through the introduction of prudential norms and increase the role of the market forces due to the deregulated interest rates. + Renae financial repression and provide operational and functional autonomy oTasiations: Financial Stability 3 Characteristics: ‘The following are some of the key characteristics of a financially stable system: ca 7. Low levels of systemic risk Importance: i and financial crises that can have significant economic and social costs, x iturns and 4 This refers to the stability of individual financial 3. This refers to the overall stability of the financial system and its ability to withstand shocks and disruptions, such as economic downturns or external events, without causing significant harm to the broader economy, 6 ‘Stiakdomacitsstity This refers tothe stability ofthe global financial system and its ability to withstand and recover from global shocks and disruptions, such as financial crises oF economi Indian Population Scenario ee a finda opreentedat 193409008 or 9 bilion oF 1393.4 million or 139 crore as of July 1, 2021. The total population in India is projected at 1,380,004,385 or 1.38 billion or 1380.04 million or 138 erote people for the year 2020. India is the second most populous country in the world behind China, It is now estimated that by 2027 India will most likely overtake China to become the most populous country inthe world with 1.47 billion people. And by 2030, India will cross the |S billion milestone. India’s population will peak ‘in 2059 with 1.65 bn people decrease further to I.45 billion by 2100. India accounts for a meagre 2.4 percent of the world surface area yet it supports and sustains a ‘whopping 17-7 percent of the world population, Since Population of india is increasing with slower rate than the world, its global share is decreasing. By 2100, 13.34% of the earth population will be in India, that is 4.42% less than the peak level of 17.76% in 2013, Population growth rate for 2020 is projected at 0.97%, that is 112th highest among 235 countries/dependent territories. The population growth reached a peak in 1974 with an annual growth rate of 2.36%. India will add 13.4 million in 2021 that is near to the population of 75th tanked Guinea The net increase ofthe population per yar has peaked in 1998 wi almost 18.6 According to the Census of India 2011, the population of India stood at 1,210,854,977. The Percentage decadal growth during 2001-3011 was 17.70%, 3.84% lower than 1991-2001 period ‘The percentage decadal growth during 2001-2011 has registered the sharpest decline since independence. Population of India had increased by 182.1 million during the decade 2001- 2011 The increased population during the decade 2001-2011 is approximately equal to the population of Pakistan, the sixth most populous country in the word Population of India, which at the turn of the twentieth centu Human capital formation Sources of Human Capital Formation Investment in education is considered as one of the most important sources of human capital formation, There are several other sources as well. Investment in health, on-the-job training, ‘migration and information are the other sources of human capital formation, ‘These sources are discussed below 1. Expenditure on Education ‘The education expenditure is an important source of human capital formation as itis the most cffective way on enhancing and enlarging a productive workforce in the country. rest in education with the objective Nations and individuals increasing their future income. 2. generating technical skills and creating manpower, well suited for improving labour productivity and thus, sustaining rapid economic development. 3, tending to bring down birth rate which in tum, brings decline in population growth rate. It makes more resources available per person. 4. education also results in social benefits since, it also spreads to others. 2. Expenditure‘on Health Health is another important source of human capital formation, A sick labourer without access to ‘medical facilites is compelled to abstain from work and there in a loss of productivity. The various forms of health expenditure are preventive medicine, curative medicine, social medicine, provision of clean drinking water, et. 3 Onthesjob Training » Expenditure regarding on-the-job training isa source of human capital formation as the return of such expenditure in the form of enhanced labour productivity is more than the cost of it Firms spend huge amounts on giving on-the-job training to their workers. It may be in different forms like @ worker may be trained in the firm itself or under the supervision of a skilled worker 6 can be sent for off campus training, ‘The firms then insist that workers should work for atleast some time in die company so that they {ean recover the benefits ofthe enhanced productivity owing to the training 4:Migration People sometimes migrate from one place to the other in search of better jobs that fetch them hhigher salaries than what they may get in their native places. It includes migration of people from ‘ural areas to urban areas in India. Unemployment is the reason for the rural urban migration in India and technically qualified people migrate from one country to another in order to get high salaries, 5. Expenditure on Information People spent to acquire information relating tothe labour market and other markets like education, health, ete For example, people seek information regarding salaries and other facilities available in different labour markets, so that they can choose the right job. Expenditure incurred for acquiring information regarding labour markets and other markets like education and health have also becomes an important source of human capital formation Human resource development? Definitions of HRD HRD (Human Resources Development) has been defined by various scholars in various ways. Some of the important definitions of HRD (Human Resources Development) are as follows According to Leonard Nadler, In the words of Prof. T.V. R: required to perform (ii) develop their general capabilities as individual and discover and exploit their own inner potential for their own and for organisational development purposes; (ii) develop an organisational culture in which superior. subordinate relationship, team work and collaboration among sub-units are strong and contribute to the professional well being, motivation and pride of employees.” According to M.M. Khan, ‘The Concept of Human Resource Development ‘Human resource development in the organisation context is a process by which the employees of an organisation are helped, in a continuous and planned way to Acquire or sharpen capabilities required to perform various functions associated with their present or expected future roles; Develop their gencral capabilities as individuals and discover and exploit their own inner potentials for their own and/or organisational development purposes; and Develop an organi tional culture in which supervisor-subordinate relationships, teamwork and collaboration among sub-units are strong and contribute to the professional well being, motivation and pride of employees. ‘This definition of HRD is limited to the organisational context. In the context ofa state or nation it would differ HRD is.a process, not merely a set of mechanisms and techniques. The mechanisms and techniques such as performance appraisal, counselling, training, and organization development interventions are used to initiate, facilitate, and promote this process in a continuous way. Because the process hhas no limit, the mechanisms may need to be examined periodically to see whether they are Promoting or hindering the process. Organisations can facilitate this process of development by planning for it, by allocating organisational resources for the purpose, and by exemplifying an HIRD philosophy that values human beings and promotes their development, Environment and sustainable development ‘Ans: Achieving economic development is crucial for any country, But is it worth it i it comes at the cost of environmental degradation? We were made aware of the ill-ffects of environmental degradation in our high schools. But what about the economic implications of such issues? Or the benefit that sustainable development can offer to any economy? This article will break down the meaning & function of ‘environment’ the various environmental issues & concems India is facing at the moment; and assess the alternative that sustainable development offers Environment Meaning & Funstion The tem ‘environment refers to the natural sting in which we liv, which is bestowed to us by ‘our ancestors. It encompasses the interaction betw: cn biotch ving emponents inca plants, animals, birds, ete.) and abiotic cor dt i ponents (and sir, wate, et} that evens vo form thi ‘SR FouajOFREHGHS served by the environment ax sustenance, ‘Providings aestheicnvae, and « consumption activities, ‘The main features of sustainable development include (G@* Increase in per capita income QP Judicious use of natural resources {§B*_ Preserving the resources for future generations ‘@HMSustainable Development Goals: The United Nations AS an affirmative action towards tackling the ‘warming, climate change, and ozone la Development Goals (SDG) and 169 ta ‘Sustainable Development Goals are: slobal environmental crisis that involves global yet depletion, the United Nations adopted 17 Sustainable gets as part of the United Nations 2030 Agenda. The 17 Employment and labor issues Ans: Democratic developing countries always have challenge of development which should benefit impoverished masses by way of providing employment and decent standard of living Universal adult Franchise which is landmark of democracy gives voice to labor which is strong in numbers. These countries can’t ignore interest of labor in favor of industry and capital. Developed countries on the other hand extended voting power to workmen only after long period of industrial development. During this period capitalists of the country amassed wealth and in later period, mainly after numerous labor movements, workers getting voting rights, activism of Intemational Labor Organization and New Deal of Roosevelt , western ‘governments took up responsibility of wealth redistribution, India a time of independence took up

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