• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

I.B Economics Commentary

Extracts from this document...


Egypt is experiencing economic growth without economic development. Poorer members in the community in Egypt are not experiencing the benefits from the growth in the country. Economic Growth is different from economic development. Economic growth occurs when the economy's Production Possibility Frontier (PPF) expands, which means that there is increase in the production of goods and services over a certain period of time. On the other hand, Economic development occurs when poverty, unemployment and income inequality are reduced, and standard of living and life quality are enhanced. Therefore, economic development is different from economic growth. In order for an economy to achieve economic development, the government has to enhance productivity through investing in public and merit goods. Public goods are associated with infrastructure such as roads, bridges, dams, canals and sewage systems. Investing in these areas will allow poor people in the society to have the benefit of it, and therefore the level of enjoyment will increase and they will feel touched by the growth in the country. ...read more.


in the economy to encourage borrowing from the banks and therefore increase investing in the economy as shown in figure-1, by decreasing r to r* the investment will increase from I to I*. An increase in investment will also increase aggregate demand (The value of final goods and services) in the economy and capacity. When AD increases, the economy will approach full employment level as shown in diagram-2, and more people will find jobs and level of unemployment again will decrease in the economy, and therefore the economy is experiencing economic development. Another barrier that prevents from development is unskilled labor because of the shortcomings in the education system. Therefore, investing in human capital and subsidizing merit goods such as education and training more effectively will achieve more skilled labor in the economy. This will lead to efficiency and more productivity in the local market, which might lead to more competitiveness on the international level which will give the firms more incentive to expand and produce. ...read more.


One of the most effective policies to achieve income distribution is Taxation, which can be progressive, proportional or regressive as shown in figure-4. For an economy like Egypt where income is greatly not distributed progressive taxation can be very efficient. For instance, the government can impose progressive tax, so that people with higher income will pay a higher portion of their income. This can help to redistribute income in an economy. To sum up, the growth in Egypt needs to be targeted at those sectors that will reduce poverty. Income has to be more distributed within the economy. Moreover, Egypt should encourage investing through out decreasing interest rates, and cut government debt. This will make Egypt experience not only growth but economic development. However, this means that there will be too much government intervention in the market. This will decrease the firms' incentive to work and expand. Moreover, progressive taxes might achieve income distribution, but it will give people less incentive to work and therefore it might cause a big decrease in labor productivity. ?? ?? ?? ?? 1 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays

  1. Old IB Questions

    It would be very difficult to engage in a "new product war" as opposed to a price war, in which price cuts can be very quickly matched or exceeded by rival firms. Also, firms in oligopoly can emerge with other firms to increase its share of the market.

  2. Growth and Development Problem Set - IB Economics exam questions and answers.

    The population growth is a significant factor to influence economic growth. In my opinion, the rapid population growth in LDCs is an objective reflection of economic growth. Otherwise we cannot afford to raise children with limited resource and poor living standard.

  1. Production Possibility Frontier (PPF)

    It means 'all other things being the same.' It rules out the possibility of other factors affecting the given situation. For example, the hypothesis that more the price of cigarettes, less the demand for it, ceteris paribus rules out the possibility that other factors like increase in health awareness have caused the decrease in demand of cigarettes.

  2. What is the impact of the Notional Interest Tax Deduction system on investments in ...

    treasury bonds to financial institutions who then sell on to people who want to save their money. 11 This leads to an increase in demand for savings or loanable funds in the economy. This can be seen on the diagram below.

  1. LDC Essay Economics Barriers to Growth

    The Harrod-Domar model focuses upon the amount of investment on the rate of technological progress vital for the growth process. Furthermore, the replica represents economic growth depending primarily on the amount of labour and capital. As lower economically developing countries regularly have an abundant supply of labour, it is a

  2. Economics Commentary - Tax cuts make a cross-party comeback, thanks to economic woe

    Bad economic news abounds: figures released on November 12th showed unemployment at 1.8m-a quarterly rise of 140,000 and the highest since 1997. Comparable economies, such as Germany and America, are planning tax cuts of their own. The monetary lever cannot be pulled much more furiously than it has been (the

  1. The Economic Problem andEconomic Systems

    The importance of capital * Capital goods increase the productivity of the land and labour so that more output can be produced from the same amount of land and labour. This allows more wants to be satisfied, making us richer.

  2. 15 Historical Economic Questions on Mercatilism and the Development of European Countries.

    These devices as well as the three-field rotation and heavy plough greatly increased farm production in Britain, promoting the growth and trade of the country. The improved cultivation of healthier fruits, vegetables, and other foods grown on British farms using the new inventions bettered the health and growth of the population.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work