Wednesday 4 December 2013

Dear Students of IGCSE IX D,
Solve these questions & submit hard copy to me on Monday 9th December 2013



PODAR INTERNATIONAL SCHOOL
GRADE : IX(IGCSE)
SUBJECT: ECONOMICS(0455)                                                       Topic: Economic Growth
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1.                 


Using the above table calculate GNP, NNP, National Income, Personal Income and Disposable income.

Ans:
GNP =                                                                        NNP =


NI =                                                                             PI =


DI =


2.                  Explain and define what NNP is.

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3.                  Define GNP and GDP. Explain the difference between GNP and GDP. Why is the difference between GNP and GDP small for most countries?

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4.                  Explain the difference between GNP and NNP. Explain why NNP is sometimes a better measure of how the economy is doing than GNP is.

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5.                  Explain how using GDP may not be a very good measure of overall social welfare.

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6.                  Assume that GDP is $9 Trillion, receipts of factor income from the rest of the world are $2 Trillion, and payments of factor income to the rest of the world are $1 Trillion. Calculate GNP from this information.

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7.                  Assume that you are given GDP and depreciation data for 1998. Explain why this is not enough information to calculate Net National Product.

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8.                  If NNP is $7 trillion, net investment is $500 billion and gross investment is $1 trillion determine the level of GNP.

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9.                  Write out the equation for calculating national income as derived from NNP.
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10.              If real GDP and nominal GDP both rise by 10% and 15% respectively from one year to the next what can we say is true about production and inflation between these two years and why?

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11.              If nominal GDP is $8 trillion and real GDP is $5 trillion, calculate the value of the GDP deflator.
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12.              How would you adjust GDP to make it a better measure of social welfare?

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13.              Give an example of how real GDP could be increased even though no more output is produced.

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Costs and Benefits of Economic Growth For 9D & 9F

Costs and Benefits of Economic Growth


The advantages and disadvantages of economic growth are fiercely debated by economists, environmentalists and other commentators. In this note we consider some of the economic and social costs and benefits from expanding levels of production and consumption. In particular we focus on the idea of sustainable growth.
The Benefits of Economic Growth
Improvements in living standards: Growth is an important avenue through which better living standards and lower rates of poverty can be achieved. This is particularly true for countries who regard growth as a key route for poverty reduction among their population. According to a report published in August 2004 by the Asian Development Bank (ADB), rapid growth in many of the countries in the Asian region has reduced the number of people living on less than $1 a day fell to 22% of the region's population in 2002. That compares with 34% in 1990 and shows "considerable progress in the fight against poverty."
Rising Employment: Growth stimulates higher employment. As we can see from the chart below, the sustained growth in the British economy since 1993 has helped to bring about a large rise in total employment, the number of people in work has risen from 2.53 million at the start of 1993 to nearly 29 million thirteen years later. This is a very impressive employment creation record, much better than most other countries in the European Union.
The accelerator effect of growth on capital investment: Rising AD and output encourages investment in capital machinery – this helps to sustain growth by increasing LRAS.
Greater business confidence: Growth has a positive impact on company profits & business confidence – good news for the stock market and for the growth of small and large businesses.
The “fiscal dividend” to the government: Government finances are cyclical in nature because a growing economy boosts the tax revenues flowing into the Treasury and it also provides the government with more money to finance spending projects.
Potential environmental benefits – richer countries have more resources available to invest in cleaner technologies. And, as nations move to later stages of development, energy intensity levels start to fall. Much depends on how many resources an economy is willing to devote to environmental improvement and protection. Over the last thirty years, the ratio of energy consumption per unit of GDP has fallen quite significantly. The reduction in energy intensity is a reflection of improvements in production technologies and also a gradual switch towards a low carbon economy. Much more progress needs to be made. Organisations such as the Carbon Trust sponsor research into low carbon technologies and many







The Disadvantages of Economic Growth
Economic growth does not come risk-free. Although our material progress can be measured in part by the growth of national output, income and spending, if the economy grows too quickly, it can bring about short and long-term problems.
Inflation risks: There is the danger of demand-pull and cost-push inflation if demand grows faster than long run productive potential High and rising inflation can be destabilizing for an economy because it puts pressure on interest rates to rise and can cause a loss of competitiveness for domestic businesses in international markets
The environment: Economic growth cannot be separated from its environmental impact. Fast growth of production and consumption can create negative externalities such as increased noise and air pollution and road congestion. Environmental damage can have a negative effect on our quality of life and limits our sustainable rate of growth. For example, road transport is responsible for 25% of UK CO2 emissions once emissions from fuel processing and vehicle manufacturing are taken into account.
Inequalities of income and wealth: Not all of the benefits of growth are evenly distributed. We can see a rise in real GDP but also growing income and wealth inequality in society which is reflected in an increase in relative poverty. The Gini coefficient is one way to measure the inequalities in the distribution of income and wealth in different countries. The higher the value for the Gini co-efficient (the maximum value is 1), then greater the inequality.  Countries such as Japan, Denmark and Sweden typically have very low values for the Gini coefficients; whereas African and South American countries have an enormous gulf between the incomes of the richest and the poorest elements of the population.
Regional disparities: Although average living standards may be rising, the gap between rich and poor can widen leading to an increase in relative poverty and a widening of the gap between different regions.
Sustainability of Economic Growth
Many of the world’s most valuable finite resources are being extracted at such a rapid rate that it questions the long-term sustainability of growth. Renewable resources are also being depleted because of over-consumption. Examples include the destruction of rain forests, the over-exploitation of fish stocks and loss of natural habitat created through the construction of new roads, hotels, retail malls and industrial estates. Some of the main environmental threats include:
  • The depletion of global resource base and the impact of global warming. There are plenty of examples around of the “tragedy of the commons”, the permanent loss of what should be renewable resources that result from over-extraction of some of our environmental resources.
  • A huge expansion of waste and pollution of the environment
  • Over-population (particularly in urban areas) putting pressure on scarce land and other resources
  • Species extinction leading to a loss of bio-diversity
The current Government supports the concept of sustainable development and focuses on four main objectives set out below:
  • Social progress which recognises the needs of everyone: Everyone should share in the benefits of increased prosperity and a clean and safe environment. Needs must not be met by treating others, including future generations and people elsewhere in the world, unfairly.
  • Effective protection of the environment: We must limit global environmental threats, such as climate change to protect human health and safety from hazards such as poor air quality and toxic chemicals and to protect things which people need or value, such as wildlife, landscapes and historic buildings.
  • Prudent use of natural resources: We need to make sure that non-renewable resources are used efficiently and that alternatives are developed to replace them in due course. Renewable resources, such as water, should be used in ways that do not endanger the resource or cause serious damage or pollution.
  • Maintenance of high and stable levels of economic growth and employment, so that everyone can share in high living standards and greater job opportunities.

Key points
  • Economic growth provides important long-term benefits for the population of a country. It can be a route out of poverty and it creates jobs and wealth.
  • Inequalities in income and wealth mean that, in many countries, the benefits from growth are not distributed evenly. This raises questions of equity (fairness) and impacts on our interpretations of how to measure standards of living.
  • The environmental consequences of growth cannot be ignored.
  • Sustainable growth meets the needs of the present without compromising the ability of future generations to meet their own needs.
  • There are environmental benefits from countries becoming richer
  • However, there are major concerns about the impact of fast growth on the world’s environmental resources.
    Economic growth is just one indicator of a country’s economic performance. Alternative measures, such as the United Nation’s Human Development Index & the Index of Sustainable Economic Welfare, take account of other indicators.


Thursday 28 November 2013

Advantages & Disadvantages of Large Scale Production

Q Explain Advantages & Disadvantages of Large Scale Production.

Advantage of Large scale production:
Efficient use of capital equipment
: There is large scope for use of machinery, which results in lower costs. A Large producer can install an up-to- date and expensive machinery. He can also have own repairing unit. Specialized in machinery can be employed for each job. The result is that production is very economical. Small producer with small markets can't keep the machinery continuous working. Keeping it idle is uneconomical. A large Producer can work it continuously and reap resulting economies.
Using of specialized labor: Specialized labor produce a large output and of better quality. It is only in a large business organization that every person can be put on the job that he can best perform.
Better utilization of special in management: The use of capable manager's time in an enlarged scale production. His assistance and specialized may be used in a large-scale production where his ability is more fruitful.
Economies of buying and selling: While purchasing raw material and other accessories, a big business can secure especially favorable term an account of its large custom. He can attract customer by offering a greater variety and by ensuring prompt execution of the orders, placed with it when he selling a product.
Economy in rent: A large-scale producer makes a saving in rent too. If the same factory made to produce a large Quantity of goods, the same amount of rent is divided over a large output. This means a smaller addition to the cost per unit in the form of rent.
Experiment and research: A large concern can afford to spend liberally on research and experiments. Successfully research may lead to the discovery of cheaper process.
Advertisement and salesman ship: A big concern can afford to spend large amount of money on advertisement and salesmanship. Amount of money spent on advertisement per unit comes to a low figure when production is on large scale. Salesman can make a careful study of individual markets and thus acquire a hold on new market or strengthen it on old ones.
Utilization of by-products: A big producer will not have to throw away any of it's by products or waste products. It will be able to make an economical use of them.
Meeting adversity: A big business can show better resistance in times of adversity.
It has much better recourses. Losses can easily bear.
Cheap credit: A large business can secure credit facilities at cheap rate. Its credit in the money market is high and banks are only two willing to give advance. Low cost of credit reduces cost of production.

Disadvantage of large-scale production:
Over-worked management: A large-scale producer cannot pay off that you can think of full attention to every detail. Costs often rise on account of the employees or waste of material by them. This is due to the lack of supervision. Owing to laxity of control costs of production go up. The management is overworked.
Individual tastes ignored: Large-scale production is a mass production or standardized production. Goods of uniform quality are turned out irrespective of the preferences of individual customers. Individual tastes are not therefore, satisfied. This results in a loss of custom.
Personal element: Paid employees generally manage a large-scale business. The owner is usually absent. The sympathy and personal touch, which ought to exit between the master and the men, are missing frequent misunderstandings lead to strikes and lack outs. This is positively harmful to the business.
Possibility of depression: large-scale production may result overhead production. Production may exceed demand and cause depression unemployment. It is not always easy or profitable to dispose of a large output.
Dependence on foreign market: A large-scale producer has generally to depend on foreign markets. The foreign markets may be cut off by war or some other political upheaval this makes the business risky.
Cut throat competition: Large-scale producers must fight for the markets. These are wasteful competition, which does not to society. Many promising businesses are ruined by senses competition. There is also competition and biddings for resorts and inputs.
International complications and war: When the large-scale producer operates on an international scale, their interest clash either on the score of markets or of materials. These complications sometimes lead to armed conflicts. Many a modem war a rose on account of scramble for materials & markets.
Lack of adaptability: A large scale producing units find it's very difficult to switch on from one business to another, in a depression small firms are able to move away from declining trades to flourishing ones easily. In this way they are able to avoid losses. This adaptability is lacking in a big business.


Sunday 27 October 2013

Go through the Link, It will help you to understand about Obamacare(Reasons for recent US Govt. Shut down) and its impact on the economy as a whole!!!!

Diwali Vacation Home Work for Grade VIII-E

Question 1:
Read the following Case Study and answer the following Questions:

A GERMAN TRAVEL COMPANY CONSIDERS ITS FUTURE

A German travel company decides to stop selling holidays in Italy and instead to offer holidays in a new destination. This is the Maldives, a group of island in the Indian Ocean, famous for their long hours of sunshine and sandy beaches.
Tourism is a fast growing industry. Not all families, however, are able to go on holidays whether at  home or abroad. Most of those who take holidays would like to have more holiday breaks.

a  1. What evidence is there in the passage of scarcity?                      (3)
    2.  Using examples identify three factors of production involved in providing holidays in the Maldives?                                                            (6)
c  3. (i) Explain the difference between economic goods & free goods.   (4)
(ii) Identify a free goods from the passage.                                   (1)

d  4.     Explain the relevance of opportunity cost for a travel firm in deciding how to use its resources.                                                                   (6)


Question 2:
A.     Using the information given in the table below, fill in the blanks and Show your calculations for the following:                                                                         [10]
     (a) Fixed cost for 0 units of output per week.
     (b) Variable cost of 6 units of output per week.
     (c) Total cost of 3 units of output per week.
     (d) Marginal cost of 5 units of output per week.
     (e) Average cost of 8 units of output per week.
Units of output (per week)
Fixed Costs    $
Variable costs   $
Total Cost       $
Marginal Cost     $
Average Cost       $
0

-
1000
-
-
1

350


1350
2


1560


3

740

180

4

1000


500
5


2400

480
6
1000


600

7


3850

550
8

3960




B. The price of a firm’s product is $5. It sells 1000 units.Calculate the firm’s total revenue (TR) and average revenue (AR). (Show your calculations)                           [2]

C.  Singapore Airlines cancelled thousands of flights between April and August 2000 because of crew shortages, bad weather and technical problems with aircraft. There was also a 3% reduction in flights because pilots refused to work overtime.
(a) Explain the difference between a fixed cost and a variable cost.      [4]
(b) Discuss whether the cancellation of a flight would have affected the fixed and       variable costs of Singapore Airlines.                                                         [6]
(c) What is meant by ‘the principle of profit maximisation’?                [3]


Question 3:
Q. A. Explain advantages & disadvantages of market economy.  [10]
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Q.B. Distinguish between free market & Mixed economy. [6]
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C. Why mixed economy is considered as the best economic system? [8]
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