3.1.1

• Growing economic power of Asia (China and India)?

  -Since WW2 global trade increased significantly

  - There is an increased number of trading blocs like India and China

  -And Greater participation from previously communist nations has led to a change in the PATTERN OF TRADE.
• Growing economic power of Asia (China and India) - Industrialisation?

  -Deindustrialisation of countries like the UK means that the manufacturing sector has DECLINED

  - So production of manufactured goods has SHIFTED to other countries, such as China

  =While the UK focuses more on services

  -This has lead to the INDUSTRUIALISATION OF CHINA AND INDIA

  =Their share of world trade has increased

  =The volume of manufactured goods that they export has

  increased

  -From 1995 to 2005, India's share of textiles and clothing fell from 35% to 16%.

  =Instead, India's manufacturing sector seems to produce more

  engineered goods than clothing and textiles

  -This has resulted in UK manufacturers selling fewer manufactured goods abroad.
• Growing economic power of Asia - infrastructure in India ?

  -China and India are important for African infrastructure.

  =They've invested in their infrastructure in exchange for

  natural resources.

  -China and India have been investing in infrastructure. (E.g. of physical infrastructure include transport, energy, water and telecommunications).

  -India's poor irrigation system makes it difficult to sustain food grain production if there is low rainfall.

  =It hurts the poorest communities and it leads to rising food

  prices. There are also regular power cuts.

  =The lack of a continuous supply of electricity affects

  transport, communication and healthcare.

  -An estimate of $400 billion needs to be invested in power to meet the development goals
• Growing economic power of Asia - infrastructure in China?


  -The Asian Infrastructure Investment Bank (AIIB) is led by China and it funds Asian energy, transport and infrastructure.

  =The UK is one of the founding members, along with

  Germany, Australia and South Korea.

  -The UK's involvement should give British firms an opportunity to invest in fast growing economies.

  -Infrastructure development is a top priority for the Chinese government.

  =From the late 1990s to 2005, 100 million Chinese people

  benefited from improved power and telecommunications.

  -Employment can be boosted with improved roads, railways and airport constructions.

  -However, some remote areas still have non-mechanised means of transport.
• Growing economic power of Africa?

  -Africa has been a top recipient of Chinese aid.

  -By the end of 2009, it received 45.7% of China's cumulative foreign aid.

  -It is important as a policy instrument for China with engagement with Africa.

  -Africa's saving rate is around 17%, whilst the avg for middle income countries is around 31%.

  =This makes it more expensive for the African public and private sectors to get funds since they have higher borrowing costs.

  =This impedes capital investment.
• Growing economic power of Africa - population?

  -The population can impact the growth and development of a country.

  -There is a link between keeping birth rates down and fighting hunger, poverty and environmental damage.

  =Rapid population growth has complicated efforts to

  reduce poverty and eliminate hunger in Africa.

  =The current population of 1.1 billion is expected to double

  by 2050, which is not sustainable.

  -Primary products are raw materials in industries such as agriculture, mining and forestry.

  =Mining accounts for just over 60% of South Africa's exports.

  =Their ability to pay foreign debts and for imports relies on

  this.
• Implications of economics growth for individuals and firms - Consumers - costs?

  -Economic growth doesn't benefit everyone, those on fixed and low incomes may feel worse off if there is high inflation and inequality may increase

  -There is likely to be higher demand pull inflation due to higher levels of consumer spending

  -Consumers may face more SHOE LEATHER COSTS which means they have to spend more time and effort finding the best deal while prices are rising

  -The benefits of more consuming may not last after the first few units due to the LAW OF DIMINISHING RETURNS, which states that the utility consumers deriving the consuming of a good diminishes because more of the good is consumed
• Implications of economic growth for individuals and firms - consumers - benefits

  -The average consumer income increases as more people are employed and wages increase

  -Consumers may feel more confident in the economy, which increases consumption and leads to higher living standards
• Implications of economic growth for individuals and firms - Firms - Costs


  -Firms could make more menu costs as a result of higher inflation, this means they have to keep changing their prices to meet inflation

  -Firms supplying inferior goods are likely to see a fall in sales
• Implications of economic growth for individuals and firms - Firms - Benefits

  -Firms might make more profits which might in turn, increase investment, this is also driven by higher levels of business confidence

  -Higher levels of investment could develop new technologies - to improve productivity and lower average costs in the long run

  -As firms grow they can take advantage of the benefits of economies of scale

  -If there's more economic growth in export markets, firms may face more competition which will make them more productive and efficient, but it will also give them more sales opportunities
• Implications of economic growth for individuals and firms - The government - Costs

  - Governments might increase their spending on healthcare if the consumption of demerit good increases
• Implications of economic growth for individuals and firms - The government - Benefits

  -The government budget might improve since fewer people require welfare payments and more people will be paying tax
• Implications of economic growth for individuals and firms - Current and future living standards - Costs

  -High levels of growth could lead to damage to the environment in the long run due to an increase in negative externalities from the consumption and production of goods and services
• Implications of economic growth for individuals and firms - Current and future living standards - Benefits

  -As consumer incomes increase, people might show more concern about the environment

  -Also, economic growth could lead to the development of technology to produce goods and services more greenly

  -Higher average wages mean consumers can enjoy more goods and services of a higher quality

  -Public services improve, since governments have higher tax revenues, so they can afford to spend on improving services. This could increase life expectancy and education levels
• Rising incomes?


  -Rising incomes could lift individuals out of poverty particularly in developing countries

  -In China its estimated that half a billion ppl have been lifted out of poverty due to the average 10% growth rate

  -However, increases in income may not be evenly distributed across a population, there could be rising inequality as a result
• Real values of GDP?

  Real values are adjusted for inflation

  -E.g. Real GDP is the value of GDP adjusted for inflation

  -E.g. if the economy grew by 4% since last year, but inflations was 2%, real economic growth was 2%
• Nominal values?


  Nominal values aren't adjusted for inflation

  -Real GDP is the value of GDP without being adjusted for inflation

  -In the above example nominal economic growth is 4%, this is misleading, because it can make GDP appear higher the it actually is
• Real and Nominal values?

  -Real and Nominal values are applied to data using constant and current prices

  - Constant prices consider inflation while current prices do not
• Calculating and interpreting index numbers?

  -Index numbers are used to make comparisons between years, and to measure the magnitude of change over time

  -. A base year is used and is then compared to other years

  -. For example, if the year 2015 is the base year, the value given to it is 100. If inflation has risen by 5% between 2015 and 2018, the index number for 2018 will be 105
• Index number equation


  Index number = Value to be converted /Value of Base x 100