Free AIOU Solved Assignment Code 4672 Spring 2023
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Course: Development Economics-II (4672)
Semester: Spring, 2023
Level: MSc Economics
Q.1 Explain the various forms of savings and their impact on national economy.
Saving, process of setting aside a portion of current income for future use, or the flow of resources accumulated in this way over a given period of time. Saving may take the form of increases in bank deposits, purchases of securities, or increased cash holdings. The extent to which individuals save is affected by their preferences for future over present consumption, their expectations of future income, and to some extent by the rate of interest. There are two ways for an individual to measure his saving for a given accounting period. One is to estimate his income and subtract his current expenditures, the difference being his saving. The alternative is to examine his balance sheet (his property and his debts) at the beginning and end of the period and measure the increase in net worth, which reflects his saving.
Total national saving is measured as the excess of national income over consumption and taxes and is the same as national investment, or the excess of net national product over the parts of the product made up of consumption goods and services and items bought by government expenditures. Thus, in national income accounts, saving is always equal to investment. An alternative measure of saving is the estimated change in total net worth over a period of time.
Saving is important to the economic progress of a country because of its relation to investment. If there is to be an increase in productive wealth, some individuals must be willing to abstain from consuming their entire income. Progress is not dependent on saving alone; there must also be individuals willing to invest and thereby increase productive capacity.
AIOU Solved Assignment Code 4672 Spring 2023
Q.2 Discuss the role of Multinational Corporation as a means of private foreign assistance and their influence over the development.
Multinational corporations are those large firms which are incorporated in one country but which own, control or manage production and distribution facilities in several countries. Therefore, these multinational corporations are also known as transnational corporations.
They transact business in a large number of countries and often operate in diversified business activities. The movements of private foreign capital take place through the medium of these multinational corporations. Thus multinational corporations are important source of foreign direct investment (FDI). Besides, it is through multinational corporations that modern high technology is transferred to the developing countries.
The important question about multinational corporations is why they exist. The multinational corporations exist because they are highly efficient. Their efficiencies in production and distribution of goods and services arise from internalising certain activities rather than contracting them out to other forms.
Managing a firm involves which production and distribution activities it will perform itself and which activities it will contract out to other firms and individuals. In addition to this basic issue, a big firm may decide to set up and operate business units in other countries to benefit from advantages of location.
For examples, it has been found that giant American and European firms set up production units to explore and refine oil in Middle East Countries because oil is found there. Similarly, to take advantages of lower labour costs, and not strict environmental standards, multinational corporate firms set up production units in developing countries.
Alternative Methods of Foreign Investment by Multinational Companies
In order to increase their profitability many giant firms find it necessary to go in for horizontal and vertical integration. For this purpose they find it profitable to set up their production or distribution units outside their home country.
The firms that sell abroad the products produced in the home country or the products produced abroad to sell in the home country must decide how to manage and control their assets in other countries. In this regard, there are three methods of foreign investment by multinational firms among which they have to choose which mode of control over their assets they adopt.
There are three main modes of foreign investment:
- Agreement with Local Firms for Sale of MNCs Products:
A multinational firm can enter into an agreement with local firms for exporting the product produced by it in the home country to them for sale in their countries. In this case, a multinational firm allows the foreign firms to sell its product in the foreign markets and control all aspects of sale operations.
- Setting up of Subsidiaries:
The second mode for investment abroad by a multinational firm is to set up a wholly owned subsidiary to operate in the foreign country. In this case a multinational firm has complete control over its business operations ranging from the production of its product or service to its sale to the ultimate use or consumers.
A subsidiary of a multinational corporation in a particular country is set up under the company act of that country. Such subsidiary firm benefits from the managerial skills, financial resources, and international reputation of their parent company. However, it enjoys some independence from the parent company.
- Branches of Multinational Corporation:
Instead of establishing its subsidiaries, Multinational Corporation can set up their branches in other countries. Being branches they are not legally independent business unit but are linked with their parent company.
- Foreign Collaboration or Joint Ventures:
Thirdly, the multinational corporations set up joint ventures with foreign firms to either produce its product jointly with local companies of foreign countries for sale of the product in the foreign markets. A multinational firm may set up its business operation in collaboration with foreign local firms to obtain raw materials not available in the home country. More often, to reduce its overall production costs multinational companies set up joint ventures with local foreign firms to manufacture inputs or subcomponents in foreign markets to produce the final product in the home country.
AIOU Solved Assignment 1 Code 4672 Spring 2023
Q.3 Discuss the main sources of capital formation and its importance for a country like Pakistan.
Capital formation is a term used to describe the net capital accumulation during an accounting period for a particular country. The term refers to additions of capital goods, such as equipment, tools, transportation assets, and electricity. Countries need capital goods to replace the older ones that are used to produce goods and services. If a country cannot replace capital goods as they reach the end of their useful lives, production declines. Generally, the higher the capital formation of an economy, the faster an economy can grow its aggregate income.
How Capital Formation Works
Producing more goods and services can lead to an increase in national income levels. To accumulate additional capital, a country needs to generate savings and investments from household savings or based on government policy. Countries with a high rate of household savings can accumulate funds to produce capital goods faster, and a government that runs a surplus can invest the surplus in capital goods.
Example of Capital Formation
As an example of capital formation, Caterpillar (CAT) is one of the largest producers of construction equipment in the world. CAT produces equipment that other companies use to create goods and services. The firm is a publicly traded company, and raises funds by issuing stock and debt. If household savers choose to purchase a new issue of Caterpillar common stock, the firm can use the proceeds to increase production and to develop new products for the firm’s customers. When investors purchase stocks and bonds issued by corporations, the firms can put the capital at risk to increase production and create new innovations for consumers. These activities add to the country’s overall capital formation.
Reporting on Capital Formation
The World Bank works as a source of financial and technical assistance to developing countries, with an aim to end extreme poverty through its programs. The World Bank tracks gross capital formation, which it defines as outlays on additions to fixed assets, plus the net change in inventories. Fixed assets include plant, machinery, equipment, and buildings, all used to create goods and services. Inventory includes raw materials and goods available for sale.
The World Bank measures capital formation by assessing the change in net savings. If the household savings rate is increasing, savers may invest the additional dollars and purchase stocks and bonds. If more households are saving, the country may report a cash surplus, which is a positive sign for capital formation. The World Bank also reports the amount of government debt that a country’s central government has outstanding, as compared with the country’s gross domestic product (GDP), which is the total of all goods and service produced by a country. If a country’s rate of capital formation increases, so does the country’s GDP.
Sources of capital formation
- 1): Domestic Resources
- 2):External Resources
- Domestic resources play an important part in promoting development activities in the country. • 1: voluntary savings • 2: involuntary savings • 3: Government savings • 4: use of idle Resources • 5: Deficit Financing
- VOLUNTARY SAVINGS • There are two main sources of voluntary savings a: Households 2: Business sector • As regards the volume of personal saving of the households. Its depends upon various factors such as the income per capita, distribution of wealth, availability of banking facilities value system of the society etc. • In the undeveloped countries, the saving protentional of the people is low as a greater number of them suffers from absolute poverty-so far as the rich section of the society is concerned. They mostly spend their wealth on the purchases of real estate luxury goods or take it abroad to safe keeping. • The business sector is an important source of voluntary savings in the less developed countries. They usually hesitate in assuming the risks associated with investment
- INVOLUNTARY SAVING •
In the developing courtiers. the income per capita of the people is low. Their propensity to consume mainly due to demonstration effect is very high as the flow of savings is inadequate to meet the capital needs of the country, the government, therefore adopts measures which restrict consumption and increase the volume of savings. The traditional methods used for increasing the volumes of saving are taxation, compulsory schemes. For landing to government. • The two fiscal measures stated above are very sensitive and delicate. They should be devised and handed very carefully. • For instance: if the people of low and middle income groups are heavily tent through various forms of taxation. Their power to save will be burdened with taxes. The tax structure is to be devised in such a manner that it should provide incentive work save and invest for various levels of income groups.
- GOVERNMENT BORROWING •
The volume of domestic savings can be increased through government issues long and short terms bonds to various mobilizes saving from the general public as well as from the financial institution. • In the developing countries, there are many obstacles which stand in the way of government’s borrowing. For instance, the money and capital market is unorganized. The rural sector is not provided with adequate financial institution. People being illiterate. Prefer to invest their savings in gold, jeweler etc. • The government of developing countries should therefore evaluate a workable program of mobilizing the savings of the people both in the rural sectors.
- USE OF IDLE RESOURCES •
In the developing countries of the world there are many resources which remain unutilized if they are properly tapped and diverted to productive purposes, the rate of capital formation can increase rapidly.
- EXTERNAL RESOURCES:
Foreign economic Assistance • Foreign loans bridges saving • Close the trade gap • Provides greater employment opportunities • Increase in productivity of various in real wages • Provision of higher products • Increase in tax revenue • Donor Country and the economic Assistance self interest reason
- SOURCES OF CAPITAL FORMATION Voluntary saving Involuntary saving Government borrowing
AIOU Solved Assignment 2 Code 4672 Spring 2023
Q.4 Define the terms human resources and human resource development. What is the importance of human resource development for a country like Pakistan?.
Human resource management (HRM) is the process of employing people, training them, compensating them, developing policies relating to them, and developing strategies to retain them. As a field, HRM has undergone many changes over the last twenty years, giving it an even more important role in today’s organizations. In the past, HRM meant processing payroll, sending birthday gifts to employees, arranging company outings, and making sure forms were filled out correctly—in other words, more of an administrative role rather than a strategic role crucial to the success of the organization. Jack Welch, former CEO of General Electric and management guru, sums up the new role of HRM: “Get out of the parties and birthdays and enrollment forms.… Remember, HR is important in good times, HR is defined in hard times” (Frasch, et. al., 2010).
It’s necessary to point out here, at the very beginning of this text, that every manager has some role relating to human resource management. Just because we do not have the title of HR manager doesn’t mean we won’t perform all or at least some of the HRM tasks. For example, most managers deal with compensation, motivation, and retention of employees—making these aspects not only part of HRM but also part of management. As a result, this book is equally important to someone who wants to be an HR manager and to someone who will manage a business.
The Role of HRM
Keep in mind that many functions of HRM are also tasks other department managers perform, which is what makes this information important, despite the career path taken. Most experts agree on seven main roles that HRM plays in organizations. These are described in the following sections.
You need people to perform tasks and get work done in the organization. Even with the most sophisticated machines, humans are still needed. Because of this, one of the major tasks in HRM is staffing. Staffing involves the entire hiring process from posting a job to negotiating a salary package. Within the staffing function, there are four main steps:
Development of a staffing plan. This plan allows HRM to see how many people they should hire based on revenue expectations.
Development of policies to encourage multiculturalism at work. Multiculturalism in the workplace is becoming more and more important, as we have many more people from a variety of backgrounds in the workforce.
Recruitment. This involves finding people to fill the open positions.
Selection. In this stage, people will be interviewed and selected, and a proper compensation package will be negotiated. This step is followed by training, retention, and motivation.
Development of Workplace Policies
Every organization has policies to ensure fairness and continuity within the organization. One of the jobs of HRM is to develop the verbiage surrounding these policies. In the development of policies, HRM, management, and executives are involved in the process. For example, the HRM professional will likely recognize the need for a policy or a change of policy, seek opinions on the policy, write the policy, and then communicate that policy to employees. It is key to note here that HR departments do not and cannot work alone. Everything they do needs to involve all other departments in the organization. Some examples of workplace policies might be the following:
Discipline process policy
Vacation time policy
Internet usage policy
These topics are addressed further in Chapter 6 “Compensation and Benefits”, Chapter 7 “Retention and Motivation”, Chapter 8 “Training and Development”, and Chapter 9 “Successful Employee Communication”.
Compensation and Benefits Administration
HRM professionals need to determine that compensation is fair, meets industry standards, and is high enough to entice people to work for the organization. Compensation includes anything the employee receives for his or her work. In addition, HRM professionals need to make sure the pay is comparable to what other people performing similar jobs are being paid. This involves setting up pay systems that take into consideration the number of years with the organization, years of experience, education, and similar aspects. Examples of employee compensation include the following:
401(k) (retirement plans)
Stock purchase plans
Since this is not an exhaustive list, compensation is discussed further in Chapter 6 “Compensation and Benefits”.
Retention involves keeping and motivating employees to stay with the organization. Compensation is a major factor in employee retention, but there are other factors as well. Ninety percent of employees leave a company for the following reasons:
Issues around the job they are performing
Challenges with their manager
Poor fit with organizational culture
Poor workplace environment
Despite this, 90 percent of managers think employees leave as a result of pay (Rivenbark, 2010). As a result, managers often try to change their compensation packages to keep people from leaving, when compensation isn’t the reason they are leaving at all. Chapter 7 “Retention and Motivation” and Chapter 11 “Employee Assessment” discuss some strategies to retain the best employees based on these four factors.
Training and Development
Once we have spent the time to hire new employees, we want to make sure they not only are trained to do the job but also continue to grow and develop new skills in their job. This results in higher productivity for the organization. Training is also a key component in employee motivation. Employees who feel they are developing their skills tend to be happier in their jobs, which results in increased employee retention. Examples of training programs might include the following:
Job skills training, such as how to run a particular computer program
Training on communication
Policy and legal training, such as sexual harassment training and ethics training
We address each of these types of training and more in detail in Chapter 8 “Training and Development”.
Dealing with Laws Affecting Employment
Human resource people must be aware of all the laws that affect the workplace. An HRM professional might work with some of these laws:
Compensation requirements such as the minimum wage
Worker safety laws
The legal environment of HRM is always changing, so HRM must always be aware of changes taking place and then communicate those changes to the entire management organization. Rather than presenting a chapter focused on HRM laws, we will address these laws in each relevant chapter.
Human Resource Development is the framework for helping employees develop their skills, knowledge, and abilities, which in turn improves an organization’s effectiveness.
Find out what types of activities are part of human resource development and the benefits they can have for an organization.
What Is Human Resource Development?
Human resource development helps organizations develop their workforce through employee training and career development which improves organizational effectiveness and performance.1
Human resource development may include many different opportunities, activities, and employee benefits, such as:
Performance management and development
The focus of all aspects of Human Resource Development is on developing a superior workforce so that the organization and its individual employees can accomplish their work goals in service to customers.
How Does Human Resource Development Work?
Organizations have many opportunities for human resource development, both within and outside of the workplace. Human resource development can be formal or informal, and it can begin as soon as you onboard new employees.
Informal learning could include:
Coaching by managers
Mentoring by more experienced employees
Collaborating with highly trained colleagues
Formal development might include:
Planned organizational change
Internal training provided by staff or a paid consultant or facilitator
Healthy organizations understand the power of human resource development and cover all of these bases.
To illustrate how human resource development can work, imagine a new sales rep has been hired by your company. They receive formal training by staff as part of the onboarding process, and regular informal coaching by managers as they learn the ropes.
As they continue their career with you, more opportunities arise for formal internal training, which is then implemented on a regular schedule. Perhaps you assign this new employee a mentor who can help them navigate any difficulties and even work to identify their special strengths; this enables the employee to be directed toward a path of advancement tailored to their unique abilities and desires.
Finally, as the employee gains more experience, knowledge, and training, they may be tapped for a leadership role, which could then involve more specialized management training.
During this time, the employee, with help from the organization’s focus on human resource development, has improved their effectiveness and productivity, boosting your company’s bottom line and overall success.
AIOU Solved Assignment Code 4672 Autumn 2023
Q.5 Discuss the various policies that advanced countries and international agencies can start to help developing countries to manage population growth.
Global population is increasing by about 1.5 percent per year, a growth rate (should it persist) that in less than half a century will double the number of people who live on the planet. On the other hand, modern medical techniques are producing life extension but not healthy life extension, and we are seeing numbers of old and chronically sick or disabled elderly people in increasingly longer economically unproductive retirements, who need consequentially increasing numbers of younger people to support them. 1, 2
The ability of the Earth to sustain the human population, posed by Malthus over 200 years ago, is a serious question. Dependence on finite resources for energy and water is already threatening international stability. Potentially exponential population growth can only make matters worse. Improving economic development in the most populous countries of the developing world (India, China) is leading to changing patterns of demand, as people seek more affluent lifestyles. Food and energy demands are increasing faster than had been predicted. Air quality resulting from over-rapid industrialisation is becoming a major problem that will have major public health effects. The likely determinants of climate change, usually attributed to the developed nations, are now spread throughout the developing world, making the ability of nations to achieve the targets signed-up to at Kyoto unlikely to be achieved. Religion is a significant factor in population growth: families in catholic families tend to be larger than protestant, and Muslim tend to be larger than others.
In 1994 the United Nations Population Information Network (POPIN) organised an International Conference of Parliamentarians on Population and Development (ICPPD) and an International Conference of Parliamentarians on Population and Development (ICPD) in Cairo. There was a shift in thinking recognised at Cairo, towards viewing population from a more humane and equitable perspective. The consensus document that was produced recognises that consumption in wealthy countries and rapid population growth in poor countries put pressure on the natural environment, both locally and globally. The OCPPD group issued an agreed statement that included the following items:
“ We therefore commit ourselves, as elected representatives of the people, to do our utmost to remove all remaining barriers in our countries that inhibit access to family planning services, information and education, as well as to help support the provision of reproductive health and family planning services as widely as possible.
We acknowledge the fact that abortions constitute a major public health concern for women all over the world. Since the use of family planning methods may prevent the prevalence of unplanned pregnancies, we call upon all national Governments to reduce the need for abortion by providing universal access to family planning information and services.
The empowerment of women and the improvement of their political social, economic and health status are highly important ends in themselves. We further believe that human development cannot be sustained unless women are guaranteed equal rights and equal status with men. In this process women should be seen not merely as the beneficiaries of change but as the agents of change as well. This entails an enhancement of their own gender awareness. We believe that education is the single most important element on the road to equality and empowerment of women.”
Rather than simply equating population policy with family planning, the new thinking is that population growth should be stabilised – and development enhanced – by attacking some of the roots of the problem: by improving women’s access to education, health care, and economic and political decisions.
Today, more than half of all developing countries have national population policies, and about 130 national governments subsidize family planning services. When polled by the UN in 1994, 91 percent of the countries that lacked national population policies stated that they intended to formulate them in the near future, reflecting a rising global commitment to population-related concerns. But national policy statements do not necessarily translate into program implementation.3
Examples from various cultures
China has operated a one-child policy for a number of years, enforced though a system of fines, relaxed after mass bereavements such as Sichuan Earthquake; the focus of China on population control helps provide a better health service for women and a reduction in the risks of death and injury associated with pregnancy. At family planning offices, women receive free contraception and pre-natal classes. Help is provided for pregnant women to closely monitor their health. Culturally, traditional religious practice requires a son to perform the parents’ funerals, leading to resistance to the policy in some rural areas when the first-born is as girl.
Growth has indeed slowed, yet during 1996 China added 13 million people to its numbers. Rural folk have been less cooperative; however, the one-child policy has achieved statistical wonders. In one generation, China’s birth rates have plunged to 1.9 children per mother – a rate that, if sustained, will lead to depopulation.
According to a recent survey, ethnic minorities are currently growing about 7 times faster than Han Chinese.4
The decline in population growth rate has exacerbated another problem familiar in the West: rapid ageing. There will be 129 million Chinese over the age of 60 as of the year 2000. By 2020, one in four will be elderly (twice the total present population of the United States) – a rare burden for a low income country.
The sex ratio at birth (between male and female births) in mainland China reached 117:100 in the year 2000, substantially higher than the natural baseline, which ranges between 103:100 and 107:100. This suggests differential abortion if the sex is known antenatally.
India operates a two-child policy. During 1970s they used forced sterilisation of the poor. India has greatly increased food production per head over last 20 years, making it better placed to absorb higher numbers. The country’s most recent approach to population issues focuses on the advancement of women economically, academically, and socially, as independent women are more likely to have small families.
Africa: birth rates in Africa are the highest in the world. By the year 2050, twenty percent of the world’s population will live on the African continent. That will be almost two thousand million people, up from eight hundred fifty-five million people today. Especially large population growth is expected in Nigeria, Ethiopia and the Democratic Republic of Congo. Other countries likely to have major growth include Burkina Faso, Mali, Niger, Somalia and Uganda.
Kenya was the first country in sub-Saharan Africa to view runaway population growth as a serious impediment to economic prosperity, and it became the first, in the late 1960s, to begin developing a national family-planning campaign. The country’s official population policy calls for matching population size with available resources, yet leaves decisions on family size up to individual families.
As recently as 1970, Africa was essentially self-sufficient in food. What fostered a breakdown in the continent’s ability to feed itself has been a decline of nearly 1 percent per year in per capita grain production since 1968 – in part due to an annual population growth for the continent approaching 3 percent.
The root cause of Africa’s crisis, according to Worldwatch Institute analyst Lester Brown, is population growth faster than on any continent in history, widespread soil erosion and desertification, and a failure by African governments to adequately support agriculture.
Europe: by contrast, France offers financial incentives for larger (3 child) families. The population of Europe is also aging faster than any other part of the world, except Japan. Birth rates are also down in many European countries. The number of people depending on workers will rise as the number of workers falls. Spending in European countries will have to increase for retirement, health care and long-term care for old people in the future.
Russia faces the most severe population decrease of any country. The population of Russia is now one hundred forty-three million. It is expected to drop twenty-two percent over the next forty-five years. If this happens, Russia could lose more than forty percent of its active workforce and have economic problems. Part of the problem is the short length of time that Russian men generally live.
The average life expectancy for Russian men is just sixty-six years. Russian women live eleven years longer. Men in Western Europe live sixteen years longer. Drugs, tobacco smoking and alcohol are some of the main causes of death among Russian men. Russia also has low birth rates.