AB204-02 Unit 6 Assignment
April 11, 2017
PART 1: Comparing Long-Run Economic Growth Rates of Countries
Use the Kaplan electronic library and databases to conduct research to identify the key factors that determine long term economic growth. You can find the most up-to-date reports on the economic growth trends of different countries under the World Bank website linked below.
Please also refer to the Webliography in the course web page for additional information on the researches done on economic issues.
After you have conducted research and read the items listed above, access the “Data & Research” tab in the World Bank website and compare growth rates between two countries of your choice. Specifically, select one advanced economy (such as U.S., Germany, etc.), and select one developing economy (such as Angola, Bangladesh, etc.).
Download their data for major economic indicators (2005–2013) such for the real GDP growth (annual %). Then identify and describe possible factors that may explain the differences between the GDP growth rates and long term economic growth of the advanced and developing economies for the countries you selected.
Somalia does not participate in the bond market, commercial banking or lending, net domestic credit, andalso no cash surplus. The United States however does participate in all these which is why the GDP is higher and why it has a great investment market. The difference between these factors is that there is no depth in the country Somalia when it comes to investing. It is basically land with no structure for the work force. Currently the regime in charge has no order and this would explain why the development of this country has slowed if not stopped.
PART 2: Loanable Funds Market
1. Examine each of the following scenarios in the market for loanable funds. Explain the impacts on private savings, private investment spending, and the rate of interest under each of the following events. Assume the economy is autarky (closed) and it does not have trade and capital transactions (flows) with foreign countries.
a. Assume the government balances its budget and reduces the size of its deficit to zero. (Refer to the graph below). What is its impact on private savings, private investment spending, and the rate of interest?
If the government balances its budget and reduces the size of its deficit to zero it would increase the interest rate to 12% or higher. Private investment spending would greatly decrease if not come to a halt and private savings would greatly increase.
b. Suppose the consumers decide to save more money, at the given rate of interest. Then assume the budget is balanced and the deficit is zero (refer to the graph below). What is the impact of this scenario on private savings, private investment spending and the rate of interest?
If consumers are saving more, the private savings will not have a very high rate of return but it will have more supply of money that will become available. Therefore, this creates better deals for investments because of having lower interest rates.
The World Bank (2014). Data. Retrieved from: http://data.worldbank.org/country/united-states
The World Bank (2014). Data. Retrieved from:http://data.worldbank.org/country/somalia
Click following link to download this document
AB 204 Unit 6 Assignment.docx