UNIVERSITY OF ENGINEERING AND TECHNOLOGY,

LAHORE

Macro-Economics

Assignment

SubmittedTo:
Mam Sadaf Razaq
SubmittedBy:
Eman Tariq (2023-BBIT-04)
Kaif Saleem (2023-BBIT-39)
Muhammad Anas (2023-BBIT-24)

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 UNIVERSITY OF ENGINEERING AND TECHNOLOGY,
LAHORE

Main Question:
Why GDP Growth Rates of Developing
Countries are higher as compared to Growth Rates of
Developed Countries? Explain by giving the
Justifications.

Developed countries:
 Developed countries often referred to as industrialized or
advanced economies, are nations characterized by high
levels of economic development, technological
infrastructure, and a high standard of living for their
citizens. These countries typically have well-established
industries, advanced technology, and diverse economies.
 Common indicators include:
 High GDP per capita
 Strong educational systems
 Advanced healthcare infrastructure

Examples:
 United States
 Germany
 Japan.

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Developing countries:
 Developing countries are nations that are in the early
or middle stages of industrialization and economic
growth.
 They face challenges like lower income levels,
limited access to education and healthcare, and
underdeveloped infrastructure.
 These countries are working towards improving their
economic, social, and technological conditions to
enhance the standard of living for their populations.
The term is used to describe regions where there is
ongoing effort and potential for growth and
development.
Example:
Iran
Iraq
Eygpt

GDP Growth Rates of 2022

Developing Countries:

 Iran (2.75%)
 Eygpt (6.65%)
 Iraq (7.01%)

Developed Countries:

 Switzerland (2.20%)
 Singapore (3.65%)
 UK (4.30%)
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 UNIVERSITY OF ENGINEERING AND TECHNOLOGY,
LAHORE

Justifications:
There are several factors that can contribute to developing countries
Experiencing higher GDP growth rates than developed countries. It's important
to note that these factors can vary across different countries and regions, and
individual cases may be influenced by a combination of these elements. Here
Are some common justifications:
 Low Base Effect:
Developing countries often have smaller economies inter most
GDP compared to developed nations. As a result, even a moderate
increase in economic activity can lead to a higher percentage
growth rate. The low base effect is essentially a statistical
phenomenon where smaller initial values result in more substantial
percentage changes.

 Demographic Dividend:
Developing countries tend to have a demographic structure
characterized by a larger proportion of the population in the
working-age group. This demographic dividend can significantly
contribute to economic growth as it means a higher number of
people actively participating in the labor force, potentially leading
to increased productivity and economic output.

 Investment Opportunities:
Developing countries present appealing investment opportunities
for businesses and investors. These nations often have untapped
markets, lower competition, and potential for higher returns on
investment. As a result, both domestic and foreign investors are
attracted to the markets, leading to increased capital in flow sand
economic growth.

 In-frastructure Development:
Investments in infrastructure, such as transportation, energy, and
communication, play a crucial role in stimulating economic growth.
Developing countries often undergo rapid infrastructure
development, which can improve efficiency, reduce logistical costs,
and create a more conducive environment for business activities.
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UNIVERSITY OF ENGINEERING AND TECHNOLOGY,
LAHORE

 Urbanization:
Rapid urbanization is a common trend in developing countries.The
growth of cities creates new markets, increases demand for goods
and services, and promotes industrialization. Urbanization, when
manage deffectively, can drive economic growth by harnessing the
potential of concentrated economic activities.

 Government Stimulus:
During economic challenges or recessions, governments in
developing countries may implement stimulus measures. These
can include infrastructure projects, social welfare programs, and
monetary policies a imedate boosting economic activity an
drestoring confidence in the economy.

 Financial Inclusion:
Increasing access to financial services in developing countries is
critical for economic development. Financial inclusion encourages
savings, investment, and entrepreneurship among the population,
contributing to economic growth and poverty reduction.

 Market Reforms and Privatization:

Undertaking market-oriented reforms and privatizing state-owned
enterprises are strategies adopted by developing countries to
enhance efficiency and reduce bureaucratic obstacles.This can lead
to increased competitiveness, productivity, and overall economic
growth.

 Natural Resource Endowments:

Some developing countries are rich in natural resources, such a
soil, minerals, or agricultural products. The extraction and export
of these resources can significantly contribute to economic growth,
although managing this wealth sustainably is crucial for long-term
development.

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UNIVERSITY OF ENGINEERING AND TECHNOLOGY,
LAHORE

 Entrepreneurship and Innovation:

Developing countries often experience a surge in entrepreneurship
and innovation as they address local challenges and capitalize on
new business opportunities. This dynamism in the business land
scape contributes to economic growth by creating new markets
and driving competitiveness.

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