Chapter : 02

Introduction to Bangladesh economy

Prepared By:
Sakera Begum
Lecturer, Department of Business Administration
University of Creative Technology, Chittagong
Economy

 An economy (from Greek οίκος – "household" and νέμoμαι –

"manage") is an area of the production, distribution, or trade[1],
and consumption of goods and services by different agents.
 Economic activity is spurred by production which uses natural
resources, labor, and capital. It has changed over time due to 
technology(automation), innovation (new products, services,
processes, expanding markets, diversification of markets, niche
markets, increases revenue functions) such as, that which produces
intellectual property and changes in industrial relations (for
example, child labor being replaced in some parts of the world
with universal access to education).
 Economic Activities
 Economic activities of human beings are mainly of two types:

Activities related to
earning money

Activities related to
spending money
The Economic activities of the
people of Bangladesh

Agricultu Business
re & trade Services
Work in Small Fish Cultivation Driving
and cottage and catching
industries fish Vehicles
Rearing
animals and
birds
 Terminology of Economy
 Consumer Spending: Goods and services bought by households in the satisfaction of
their needs and wants. It includes non-durables such as food, semi-durables such as
clothing, and durables such as refrigerators.
 Exchange Rate: An exchange rate between two currencies is the rate at which one
currency can be exchanged for another. That is, the exchange rate is the price of a country’s
currency in terms of another currency. For example, if the exchange rate between the U.S.
dollar (USD) and the Japanese yen (JPY) is 120 yen per dollar, one U.S. dollar can be
exchanged for 120 yen in foreign currency markets.
 GDP: The worth of goods and services produced within the geographical limits of the
country is known as Gross Domestic Product (GDP).
. Though GDP is usually calculated on an annual basis, it can be calculated on a quarterly
basis as well
 GDP per capita: GDP per capita is a measure of a country's economic output that
accounts for its number of people. It divides the country's gross domestic product by its
total population. That makes it the best measurement of a country's standard of living. It
tells you how prosperous a country feels to each of its citizens
 Terminology of Economy…..

 GNP: The worth of goods and services produced by the country's citizens
irrespective of the geographical location is known as Gross National
Product (GNP).
 Interest Rate:  Interest rate is the amount charged, expressed as a
percentage of principal, by a lender to a borrower for the use of
assets. Interest rates are typically noted on an annual basis, known as
the annual percentage rate (APR)
 Inflation: Inflation is a quantitative measure of the rate at which the
average price level of a basket of selected goods and services in an economy
increases over a period of time. Often expressed as a percentage, inflation
indicates a decrease in the purchasing power of a nation’s currency. As
prices rise, they start to impact the general cost of living for the common
public and the appropriate monetary authority of the country, like the 
central bank, then takes the necessary measures to keep inflation within
permissible limits and keep the economy running smoothly. 
 Unemployment: A situation where someone of working age is not to get
a job but would like to be in full time employment
 Undeveloped countries
Those countries are called
undeveloped ones where no
economic development in real
term has taken place and
where per capita of the people
is less and the standard of
living is low
On the basis of GDP per capita
some of the poorest of
countries of the world are:
Togo( $899), Madagascar
($934), Afghanistan ($956),
Mozambique ($1085)
 Less per capita income and Standard
of living
 Overdependence on agriculture
 Undeveloped industry
 Less capital
 Insufficient use of natural resources
 Wide-spread unemployment
 Lack of technical knowledge
 Underdeveloped transport and
communication system
 illiteracy
 Over-dependence on foreign aid
 Adverse social environment
 Developing Country

The countries where economic

development is taking place
through planned programs
and where per capita income
of the people and their
standard of living are
gradually increasing are
called developing countries.
According to World Bank
some of the developing
countries on the basis of low
income economics are:
Argentina, Bangladesh,
Bhutan, Cambodia.
 Tendency of per capita income to
increase
 Dynamism in economic
programs
 Gradual development of
agriculture and industry
 Unemployment and economic
disparity
 Planned development efforts
 Socio-economic problems
 Gradual development of social
environment
 Developed Country
 High per capita income and
The countries where substantial standard of living
development has taken place and
where per capita income of the  Extensive industrialization
people and their standard of living
are very high are called developed  Abundance of capital
countries. Productivity in agriculture
and industry is high in these
 Full utilization of resources
countries as a result of application of
adequate capital and extensive
 Developed technological
technical knowledge. knowledge
According to world bank some of the  Developed transport and
developed countries on the basis of
HDI are: Australia, America,
communication system
German, Switzerland  Higher rate of education
 Skilled manpower
 Less pressure of population
 Developed social environment
Economic System

Capitalist Mixed
ic Economic
Economic System
System

Socialistic
Economic
System
 Capitalistic Economic system
Capitalism is an economic system in
which capital goods are owned by
private individuals or businesses. The
production of goods and services is
based on supply and demand in the
general market (market economy),  Characteristics of Capitalistic
rather than through central planning
economic system:
(planned economy or command
economy). The purest form of  Individual ownership of resources
capitalism is free market or laissez-
 Non-government initiatives
faire capitalism, in which private
individuals are completely  Automatic pricing system
unrestrained in determining where to
invest, what to produce or sell and at  Freedom of consumers
which prices to exchange goods and  Free competition
services, operating without checks or
controls.  Profit earning
 Socialistic Economic
System
In a purely socialist system, all
legal production and distribution
 decisions are made by the
government, and individuals rely
on the state for everything from
food to healthcare. The
government determines output  Characteristics of Socialistic
and pricing levels of these goods Economic System:
and services.
 State ownership of health
Socialists contend that shared
ownership of resources and  Absence of individual initiative
central planning provide a more
equal distribution of goods and
 Central planning
services, and a more equitable  Limitation of the freedom of
society. consumer
 A Mixed Economic
System
A mixed economic system is a
system that combines aspects of both 
capitalismand socialism. A mixed
economic system protects private
property and allows a level of
economic freedom in the use of  Characteristics of Mixed
capital, but also allows for Economic System
governments to interfere in economic
activities in order to achieve social  Co-existence of government and
aims.  non-government sectors
 Government control
 Pricing system
 Freedom of consumers
 Profit earning
 Vicious Cycle
of Poverty

“The vicious cycle of poverty

is such a combination of
certain forces which through
mutual actions and reactions
keep a country poor.
A country is poor because it
is poor”…. Ragnar Nurkse
 Causes of VCP
De
De
ma
ma
nd

Different economists have

nd
Side
Side

different opinions about the

vicious circle of poverty.
According to prof. Nurks, “
The main reasons of vicious
circle of poverty is the lack of Cause
capital formation.” s of
Viciou
Similarly, Kindleberger
Sup

s Cycle
Sup
ply
ply
Sid
Sid
e
e

opined that vicious circle of of

poverty takes place due to the Povert
small size of the market. y
However, the reasons of
vicious circle of poverty can
be classified into three groups

Mar
Mar
ket
ket
Imp
Imp
erfec
erfec
tion
tion
Demand Side
Low
Productivit
Capital y
deficiency

Low
Income

Low
Investmen
t
Low
Demand
Supply Side
Low
Productiv
Capital ity
deficienc
y

Low
Income

Low
Investme
nt
Low
Savings
Market Imperfection