The twin relationship between population and economic growth has always been a subject of great interest to economists, as population is a resource that supplies the labour force needed for industrialization that symbolizes economic growth. However, it is an established principle that labour alone cannot produce anything without the help of other resources. If other resources needed for production are available in sufficient quantity, then a larger lobour force could become a productive asset of a country.

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Growth Rate of Population

At any point of time, all countries have some people living there, the number of these people constitutes the size of population of that country at that time. This number, however, keeps on changing continuously through birth, deaths and immigration. Therefore, increase in the number of people during a fixed period of time, in a country, is called the growth rate of population.

The rate of growth of population during a period is estimated as the ratio of increase in population during a period to the total population at the beginning of the period. The growth rate of population depends upon the birth rate (estimated as total number of birth per thousand of population). The difference between birth rate and death rate during a year per 1000 population.

There is a reciprocal relationship between rate of growth of population of a country and its economic growth. On the one hand population growth of a country is effected by its economic growth and on the other, economic growth too can be affected by population growth rate.

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(A)            Effects of Population Growth Rate on Economic Growth

The effects of high growth rate of population on economic growth of developing countries, such as ours, can best be explained by examining its effects on the resources of these countries. These resources are: Human resources, natural resources and capital (man-made) resources.

Effects on Human Resources

As population supplies human resources, the large human resources are the sources of large potential labour force that can be both a source of strength and a source of weakness as well. However, labour alone cannot produce anything as production requires natural resources and capital too. For the engagement of large and fast increasing labour more and more other resources are needed.

In developing countries like India, where there is already a shortage of capital, natural resources are getting scarce with a fast increasing population. These developing countries are unable to utilize even their existing labour force that is main cause behind the large level of unemployment there.

The high rate of growth of population also creates problems in the process of improving the quality of human resources. As modern production techniques require highly skilled labour force. In this context, the literacy level is quite low in developing countries. Due to the already large size of population huge capital resources are required for removing illiteracy and for skill formations; this problem becomes more intense because of the fast rate of growth of population.

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Effects on Natural Resources

Natural resources include land surface, minerals, forests and water, etc. a large part of the land area, fixed one, of a country is used for agriculture. The high growth rate of population creates many problems by increasing pressure of labour force on land. It results in further division of land holdings, that ultimately and adversely affect the productivity of the land, sometimes further subdivisions of the land lead to the wastage of land itself.

The fast growing population on the one hand and lack of work opportunities on the other results in more people than required for working in agriculture. This increasing pressure on agricultural land thus results in unemployment.

In addition, fast urbanization creates many other problems such as congestion, slums, insanitation population etc. One of the most crucial factors that creates a land related problem in the process of Urbanization is the migration of the people to urban areas in search of work. All these problems cast negative effect on economic growth. The intensity of the problem can be comprehended from the fact that the pressure of population of land has been steadily increasing resulting in the increase of density from 117 per sq. km. in 1951 to 324 in 2001.

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Effects on Capital Formation

In economic growth of any country capital plays a very important and more or less a decisive role. A large part of resources for investment that developing countries generate are eaten away by their fast growing population as fast growth rate of population results in rapid increase in the requirements of consumption.

The high growth rate of population reduces the supply of these resources for raising the per capital income and quality of life of people in developing countries, due to which economic growth of these countries are adversely affected.

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(B) Effects of Economic Growth on the Growth rate of population

Numerous studies on the economies of the world have displayed that as in the underdeveloped countries both the birth rate and the death rate remain high, the gap between birth rate and death rate remains low, hence the rate of growth of population in such countries is slow. In these countries the income level is so low that malnutrition and undernourishment have become a permanent feature. Medical and sanitation facilities are nearly non-existent. Even safe drinking water is not available to a very large section of the population.

When economic growth takes place, the income levels start increasing, that eventually lead to improvement in standard of living. Medical and sanitation facilities improve and some diseases are eradicated; all these have a direct effect on death rate that starts falling rapidly.

As economic growth catches momentum, there appears a further improvement in the level of income and nutritional levels. Literacy  level rises and standard of living improves. There is a greater acceptance of small family norm. All these changes affect both the death rate as well as birth rate. During this phase of economic growth, through which India is passing, the decline in birth rate is faster. As a result of this faster decline in birth rate and the death rate stagnating at a low level, the gap between birth rate and death rate is again very small, clearly indicating that the rate of growth of population is very slow, a trait that all developing countries share and show how much is it important to create a balance between economic growth and population growth to achieve the final aim of creating a developed society.

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Difference between the International Monetary Fund and World Bank – IMF vs World Bank

People sometime confuse the World Bank with the Internation Monetary fund (IMF), which is also setup at the Bretton Woods Conference in 1944.

The fundamental difference between IMF and World Bank is this:

The Bank is primarily a development institution; the IMF is a cooperative institution that seeks to maintain an orderly system of payment and receipts between nations. Each has a different purpose, a distinct structure, receives its funding from different sources, assists different categories of members, and strives to achieve distinct goals through methods peculiar to it. While the World Bank provides support to developing countries, the IMF aims to stabilize the international monetary system and monitors world’s currencies.

International Monetary Fund IMF vs World Bank

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Financial inclusion

Capitalism is a type of economic system where business is privately owned and run by the people, rather than by the government. This is different from a command economy like communism where the government controls business.

Free Market

Another name for dis economic system is the free-market system. The “free” in free market system means that the market is free to work itself out without government intervention. Businesses can decide what products to make and how much to sell them for. People can decide what products to buy and how much they want to pay.

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Supply and Demand

One of the basic ideas of capitalism is the idea of supply and demand. Supply and demand says that the price of a product will eventually settle at a point where the demand for a product will equal the supply of a product. This way the market will find the perfect price and volume of a product. This is different from a command economy where the government might set the price and volume of a product.

Adam Smith

The idea of the free-market system was first introduced by Scottish economist Adam Smith in 1776. He wrote a book called The Wealth of Nations that described how a free-market economy would work. He said that government should stay out of the economy and let pure competition determine pricing and products.

Modern Capitalism

Modern capitalism is somewhat different than what Adam Smith described. Today, many countries have a capitalist economy, but the government takes an active role in stabilizing the economy and providing regulations to protect the public. This type of economy is called a mixed economy.

The United States is considered a capitalist economy. However, the government has all sorts of laws to monitor businesses and the economy. There are the law against monopolies, regulations to make workplaces safe, anti-discrimination laws, regulations to protect the environment, taxes to redistribute wealth, and Social Security to help the elderly. Although much of the economy is run on capitalism, the government is very much involved.

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Pros of Capitalism

• Efficiency – Capitalism forces companies to compete for business. This competition makes companies be more efficient.
• Freedom – People and companies are free to do what they want in a capitalist economy. Governments in a capitalist economy have less control and less power. This leads to greater political freedom.
• Innovation – In a capitalist economy, people and companies are rewarded for innovation. This leads to greater technological advances.
• Economic Growth – Capitalism leads to economic growth and a higher standard of living.

Cons 

• Social inequality – Capitalism can lead to an unfair distribution of wealth with a few people holding a significant amount of the money.
• Monopolies – Capitalism can create powerful monopolies where one company can control pricing and supply without government intervention.
• Bad labor conditions – Capitalism can lead to unsafe work conditions and unfair wages for the working class.

A mixed system of capitalism with some government intervention can enable economic growth, freedom, innovation, and efficiency. Government intervention is needed to prevent monopolies, social inequality, and poor labor conditions.

Interesting Facts

• Most countries in the world today have a mixed form of capitalism with varying degrees of government regulation. There are really no countries that are purely capitalist.
• Although China has a communist government, much of their economy today is based on capitalism.
• According to the Heritage Foundation’s 2014 Index of Economic Freedom, the most capitalist country in the world is Hong Kong followed by Singapore and Australia. The United States ranks 12th.
• An important characteristic of capitalism is private property.

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All around the world different countries use different types of money. Many countries have their own money. This money is backed by the government and is usually called “legal tender.” Legal tender is money that must be accepted as a form of payment in that country.

Major World Currencies

Although there are many different types of money throughout the world, there are some major world currencies that are accepted or used in several different regions and countries. We describe some of these below:

• British Pound Sterling – The British pound is the official currency of the United Kingdom. It is currently the fourth most traded currency in the world. Prior to 1944, it was considered the world reference for currency.
• U.S. Dollar – The U.S. dollar is the official currency of the United States. It is the most used currency in international transactions. There are other countries (i.e. Ecuador and Panama) who use the U.S. dollar as their official currency.
• European Euro – The Euro is the official currency of the European Union. Many of the countries in the European Union use the Euro as their official currency (not all of them do such as Denmark and the United Kingdom). The Euro passed the U.S. dollar in total cash in circulation in 2006.
• Japanese Yen – The Japanese Yen is the official currency of Japan. It is the third most-traded currency in the world.

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List of World Currencies

Here is a list of some of the currencies used throughout the world.

• Australia – dollar
• Brazil – real
• Canada – dollar
• Chile – peso
• China – yuan or renminbi
• Czech Republic – koruna
• Denmark – krone
• France – euro
• Germany – euro
• Greece – euro
• Hong Kong – dollar
• Hungary – forint
• India – rupee
• Indonesia – rupiah
• Israel – new shekel
• Italy – euro
• Japan – Yen
• Malaysia – ringgit
• Mexico – peso
• Netherlands – euro
• New Zealand – dollar
• Norway – krone
• Pakistan – rupee
• Philippines – peso
• Poland – zloty
• Russia – ruble
• Saudi Arabia – riyal
• Singapore – dollar
• South Africa – rand
• South Korea – won
• Spain – euro
• Sweden – krona
• Switzerland – franc
• Taiwan – dollar
• Turkey – lira
• United Kingdom – pound sterling
• United States – dollar

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Fun Facts About World Money

• Some countries like Canada and Australia are now using plastic, rather than paper, to make their bills.
• The portrait of Queen Elizabeth II has been on the money of 33 different countries.
• The first living person to be featured on a coin was Julius Caesar in 44 B.C.
• The first euro coins and bills were introduced in 2002.
• Stores in some countries may accept multiple currencies. The tourist section of Denmark that accepts both Danish krone and the euro.

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