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Mishkin (2012) defines macroeconomics as the study of economic activity and prices in the overall economy of a nation or a region. In macroeconomics economic theories are utilised to elucidate particular economic phenomena and the theory involves some economic models. Macroeconomics focuses on three data series which are the real GDP, unemployment rate and inflation rate. Focusing on GDP the gross domestic product it has emerged as the single most renowned economic indicator for government policies and businessman.Wenzel (2009, p 61) defines GDP as the measure of the size of an economy as captured by the market value for all final goods and services sold within a given period of time. As it compounds a whole sphere of economic activity in a single number and can be decomposed in its contributing parts, it is an invaluable measure of aggregate production that proofs extremely valuable for extracting specific information about the activities in a particular sector.Further, the GDP is the broadest measure of income existing and has the noble features of being easily quantifiable, internationally standardised and above all readily available relatively consistency for all countries. As the world population continues to grow geometrically great pressure is being placed on available resources and the environment is getting strained. Hence this has led some different policies to be applied in various countries to manage the population growths.Population growth increases demand, however, it also floods the labour force with excess employees thereby depressing wages and increasing poverty hence the GDP is affected unfavourably. The following essay seeks to exhibit the Solow growth model graphically and empirically which according to Mishkin (2012) the Solow model articulates how saving rates and population growth determine accumulation which in turn affects economic growth. This model also postulates that GDP is produced according to an aggregate production function technology.The model is built on three blocks which are production function, investment function and capital accumulation. The study of the essay aims to depict the relationship between GDP and population growth thus how increases and decreases in population affect the GDP per capita. MAIN DISCUSSION Figure 1 [pic] NB: Trend line was computed using statistical software. The raw data for the above countries is on the appendix. The horizontal axis (x-axis) has the population growth 1960- 2010 The vertical axis (y-axis) has the GDP per capita 2010The graph above exhibits various countries from six continents namely Western Asia, South Asia, South East Asia, Latin America and Africa with their GDP per capita of the year 2010. There is a negative linear relationship on the graph with a trend line of y= -9969. 7x + 32595 exuding the fact that as the population of a country increases the GDP per capita increases. This also articulates that there are more countries with high population and have low GDP as compared to countries with low population growth which have high GDP per capita.According to Mishkin (2012, p 160) the Solow model articulates that high population growth lowers the average person’s standard of living since the economy will have more workers with the same amount of capital, each worker has less capital with which to work. The country in the graph above which is Kenya has a relatively high population growth of 3. 22% and the GDP per capita of $1689. This is also indicated in KenyanInformationGuide. com (2011) that Kenya has a population which is higher than the world’s average of 1. % especially in urban areas due to people who migrate in search for jobs and better standards of living. This has resulted in overpopulation in major cities and scarcity of jobs. According to Mishkin (2012) the Solow model suggests that an increase in population growth shifts the depreciation and capital dilution upwards. This is due to the fact that in Kenya a lot of people are not educated so their usage of capital leads to faster depreciation and since there are many their number would not be toning with the available capital hence dilution is enhanced.This is also expressed on Figure A which is graphically: Figure A The response to a rise in population growth increase [pic] Mishkin (2012) states that the Solow model assumes capital-accumulation equation shows the change in the capital stock per worker which is change in capital stock per worker = Investment per worker – Depreciation per worker. For the steady state to occur investment has to be equal to depreciation. This is also graphically shown on Figure B that investment should be equal to depreciation Figure BThe Solow Diagram [pic] On the graph Iraq has a population growth of 2. 97% and this is relatively high and it has GDP per capita of $3 562which is quite low. According to Indexmundi (2011) due to wars in Iraq the government has been encouraging population growth and there has been a high fertility rate and a relatively young population and 45% of which is under the age of 15. The International Monetary Fund also estimates that the effects of the UN sanctions have begun to fade thus the emigration of middle class has slowed.These factors mentioned have been catalytic to the increase in population hence affecting GDP. Since Iraq depends on the oil sector the population of young people has been an adverse effect since they are not skilled to operate hence a faster rate of depreciation on the available income hence a low GDP per capita enhanced. More so these countries with high population do not have room for technological advancement as there would be more people to take care of hence no improvements are made on the technological sector.This hence creates capital dilution which is shown on Figure A thus lowering the level of GDP per capita in overall. More so many countries like Kenya and Iraq have had changed demographic structures, with an increasing number of retirees relative to workers who are in their prime saving years (Projectsyndicate. org, 2010). Again these countries have a lot of people who are uneducated who are more interested in current consumption and less interested in the future hence affecting the GDP per capita adversely.Further, Liu & Premus (2000, p 14) reveal that the Solow model leads to several testable hypothesis as to why some countries are rich and others poor. In particular, it exudes that economies that have a higher stock of capital per worker (because in the past they have saved more) and a lower population growth rate will exhibit a higher level of output per capita in steady state equilibrium. Countries such as Macao, Japan and Korea Republic have high GDP per capita and have low population supporting what the Solow model suggests.These countries have policies which enhance low population for example in Macao there is one child policy which is being permitted by the government and the birth rate has been decreasing hence low population. Again in these countries there are high sanitary and health standards producing high life expectancy. This therefore keeps the capital per worker at a steady state as the workforce is fit for productivity in the countries (Indexmundi. com, 2011). Japan is the world’s largest automobile manufacturing country and one major long term concern for the Japanese labour force is a low birth rate.According to Mishkin (2012) the Solow model exudes that the country with high savings has high GDP per capita and Japan has high savings and investments rates, has a well educated and industries workforce, intensive promotion of industrial development and foreign trade produced a mature industrial economy (Japantoday. com, 2012). This supports what the Solow model suggests as Japan has low population and high GDP per capita. However on the other hand Saudi Arabia has high population growth and high level of GDP per capita which does not commensurate with what the Solow model proposes.As graphically shown in figure 1 Saudi Arabia has a population growth of 3. 81% and a GDP per capita of $22 713 which is relatively high. According to the International Monetary Fund. com (2011) abundant human and natural resources accounts for a large share of production and exports and enjoys on high standards of living. In Saudi Arabia there is petroleum production and high population and this enhances greater exports which lead to high GDP. This differs from the Solow model because no capital dilution takes place regardless of an alarming population growth. Further, there is Timor – Lister which has a population of 1. 2% and a GDP per capita of $928. This contradicts the Solow model as this country has low population growth and low GDP per capita at the same time whilst Mishkin (2012) exudes that low population growth enhances high GDP per capita as there is no capital dilution and depreciation. Timor – Lester faced Indian occupation which was marked by brutality hence led to a number of people to flee to other countries leaving the population low. This also led to high illiteracy rate and productivity was adversely affected as people did not posses much needed expertise thus a low GDP per capita enhanced (Indexmundi. om, 2010). To a greater extent the Solow model is recommended as many various countries complement the understudy of the essay as exhibited in Figure 1. Countries like Macao, Japan and Korea republic have relatively low population and high GDP per capita whereas countries like Kenya and Iraq have high population growth rate and low GDP per capita which seem to support what the Solow model suggest. Figure 1 also exhibits how Asian countries experience high GDP per capita as there is high level of technology.The fact that there is low population growth in these countries room for technological advancement is created hence capital accumulation increases. Though there may be countries which contradict with the Solow model like Saudi Arabia and Timor – Lester which have high population growth and high GDP per capita and low population growth and low GDP per capita, a lot of countries in this understudy seem to prop this theory hence being recommended. Reference List Gamber, E & Colander, D. C. (2006). Macroeconomics. Pearson Practice Hall: South Africa. Indexmundi. com (5 January 2011).Economy Profile Retrieved (27 March 2012) from http://www. indexmundi. com/economy-profile. html International Monetary Funds. com (16 December 2010). Growth and stability in Saudi Arabia Retrieved http://www. imf. org/external/pubs/ft/mena/04econ. htm Japantoday. com (26 April 2009). Japan Today: Japan News and Discussion: Japan’s Population Growth Slow on Record. Retrieved (29 March 2012) from http://www. japantoday. com/category/national/view/japans-population-declined KenyaInformation. com (26 June 2011) Kenya Information Guide Retrieved 25 March 2012 from http://www. enya-information-guide. com/kenya-population. html Liu, L. G & Premus, R (2000). Global Economic Growth: Theories, Research and Studies. Mishkin, E. S (2012). Macroeconomics Policy and Practice. Pearson: Columbia University Global Edition. Projectsyndicate. org (18 September 2010). Savings Crisis. Retrieved (28 March 2012) from http://www. project-syndicate. org/commentator/savings-crisis. html. Trading economics. com (4 April 2011). Our changing planet Retrieved 26 March 2012 from http://www. tradingeconomics. com/iraq/population-growth-annual-percentagewb-data. html Appendix COUNTRIES |POPULATION GROWTH |GDP PER CAPITA 2010 | |IRAQ |2. 97 |3562 | |EGYPT |2. 15 |6180 | |LEBANON |1. 62 |14067 | |MACAO SAR |0. 76 |63721 | |JAPAN |0. 5 |33,753 | |HONG KONG |1. 72 |46503 | |TURKEY |1. 91 |15321 | |SAUDI ARABIA |3. 81 |22713 | |BANGLADESH |2. 19 |1659 | |INDIA |1. 8 |3582 | |PAKISTAN |2. 65 |2688 | |AFGHANISTAN |2. 56 |1207 | |SRI LANKA |1. 48 |5078 | |TAJIKISTAN |2. 41 |2163 | |MALDIVES |2. 1 |8522 | |BHUTAN |2. 34 |5329 | |MALAYSIA |2. 51 |14731 | |KOREA REPUBLIC |1. 37 |29004 | |THAILAND |1. 88 |8554 | |VIETNAM |1. 3 |3205 | |PHILIPPINES |2. 57 |3969 | |INDONESIA |1. 93 |4325 | |LAOS |2. 14 |2573 | |TIMOR-LESTE |1. 62 |928 | |VENEZUELA |2. 0 |12233 | |ARGENTINA |1. 35 |16012 | |BRAZIL |1. 99 |11210 | |COLOMBIA |2. 14 |9462 | |URUGUAY |0. 57 |14384 | |TRINIDAD & TOBACO |0. 6 |25730 | |CHILE |1. 63 |15732 | |MEXICO |2. 19 |14498 | |MALAWI |2. 87 |872 | |UGANDA |3. 19 |1272 | |KENYA |3. 2 |1689 | |ETHIOPIA |2. 51 |1041 | |TANZANIA |2. 98 |1433 | |REP CONGO |2. 76 |4285 | |GABON |2. 23 |15183 | |SWAZILAND |2. 5 |5143 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | .

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