Authors adds threshold values of total credit to the private sector and deposit money bank assets, above which the total effect of remittance on growth is positive. Azam and khan (2011) Running the linear regression of two remittance receiving and same features countries i.e. Azerbaijan and Arminia. They empirically proves that workers remittance are significant for the acceleration of growth in the field of study. Recommending to formulate the policies and encouraging to utilize more efficiently in order to improve society living standard.
INTRODUCTION Economic growth is defined as the increased capacity of an economy to be able to produce goods and services in comparison from one period of time to another. This is figured by the genuine Gross Domestic Product (GDP) and development, and is measured by utilizing genuine terms such as “Balanced Inflation”. These terms help to remove any distorted views on the perceived outcome of inflation on the cost of merchandises produced. Likewise, Economic growth is related to the high expectations in a person’s standard of living. If the standards are high, it wouldn’t be beneficial for the economy as the working class individuals will face a lot of trouble.
1.Definition of the macroeconomic variable a) Economic Growth A rise in the capacity of an economy to produce goods and services, compared from one period of time to another. Economic growth can be considered in nominal terms, which contain inflation, or in real terms, which are adjusted for inflation. The increase of an economy is thought of not only as an increase in productive capacity but also as a development in the quality of life to the people of that economy.Increase in the capital stock, advances in technology, and improvement in the quality and level of literacy are considered to be the principalcauses of economic growth. Two main factors of Economic growth are an increase in aggregate demand and aggregate supply. b) Inflation
The rich may choose to spend,give away, invest or save their money. Basically, the rich contributes the larger portion of resources to investment activities and technological improvements which lead to economic growth(Andriuskevicius, Ciegis&Dilius, 2017). The high-income households use their accumulate savings to actively take part in investment activities such as investment in capital stock and private equity. These investment activities increase the business growth and thus require more labor input and effort to produce higher gross domestic product (GDP). Indirectly, the rich also provides additional job opportunities for the middle and low-income households.
Keynesians place a greater role for expansionary fiscal policy (government intervention) to overcome recession. Keynesian economic theory relies on spending and aggregate demand to define the economic marketplace. Keynesian economists believe the aggregate demand is
When income rises, consumption will also rise but by less than increase in income. Consumer behavior further explains why there is rise in saving from increased level of income. In the third-world countries, relationship between consumption and saving do not hold. Due to poverty, consumption on goods will increase as people wish to fulfill their unfulfilled wants. Thus, MPC is high whilst MPS (Marginal propensity to save) is low in such economies.
This lowers aggregate demand in the economy. Or vice versa, lower interest rates will stimulate the economy with higher spending, increasing demand. What is Fiscal Policy? On the other hand, fiscal policy involves changing tax rates and levels of government spending to influence aggregate demand for goods in the economy.Keynes ' model of government intervention focuses on government fiscal policy
Keynesian Theory The birth of “The general theory of employment, interest and money” in 1936 by Keynes has provided the basis for analyzing modern macroeconomic policies, and is usually referred to as the Keynesianism. Keynes argued that if economy is in recession period, Government could maximize economy (full production and total aggregate demand) through increase in government spending or tax cut to increase investment and consumption. Therefore, government influences through fiscal policies will drive up investment and demand to attain full productions. Keynesianism has been used aggregate demand (AD) and aggregate supply (AS) framework to analyze the relationship between output, inflation and employment. The Keynesian View of the AD/AS Model uses an SRAS curve (see figure1), which is horizontal at levels of output below potential and vertical at potential output.
Stable political environment How the Investment in Technology Leads to the increase in the Production Possibility Frontier An economy often experiences technological progress with increase in investment in new technology and R&D. Technological progress would mean that society is able to produce more output from the same amount of productive resources. Technological progress aids in increasing quantity and quality of all factors of production. As a result, the production of the good in question, will
This accumulation of capital would then lead to growth. Hirschman (1958) argued that FDI also brings in managerial skills and technical expertise. He maintained that local investors tended to be static, working at the same pace as the government. In this regard even though they were able to generate savings for the economy, they were not able to utilize them to stimulate further growth as they were generally apprehensive about taking on larger projects. Foreign investors on the other hand were innovative and detached from the government’s reluctance to engage in large capital projects that lead to dynamic growth.