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Comparative Economic Analysis For Economic Convergence

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Comparative Economic Analysis For Economic Convergence

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Comparative Economic Analysis for Economic Convergence

Department of Business Administration, University of the


People

BUS 1104- 01: Introduction to Macroeconomics

Felicia Thomas

February 8, 2024
Introduction:

In this assignment, I will perform a comparative analysis of two countries; The


United States and Morocco, with a particular focus on GDP and economic
growth. This analysis aims to evaluate the concept of economic convergence,
providing valuable insights into international trade and monetary policies and
their influence on economic systems and their growth.

Analysis of a High-income country: The United States

The United States, as a global economic powerhouse, has experienced dynamic


changes in its GDP growth over recent years. It knows a GPD growth rate of 3.3,
its actual GDP is 25440 while its GDP per capita is 76,329.6.
Additionally, the US has an Unemployment rate of 3.7 and an inflation rate of
3.4, and a trade balance of -62.2.
Among the key economic policies and reforms implemented in the United states
to stimulate economic growth, there are aspects in the healthcare system, for
example, the prevalence of mental illnesses increased over the last decade for
the first time since the 1950s. That was largely driven by illness in children that
more than doubled from 2010 to 2019. President Biden drew attention to the
problem and sketched a vision of how to address it. The President’s top
economic priority is tackling inflation and reducing costs for American families
– so we can sustain this historic economic recovery in a way that benefits all
Americans.
The U.S. Congress enacted the Inflation Reduction Act that established the
ability of the federal government to negotiate prices for prescription drugs and
established catastrophic protection against the costs of prescription drugs. These
are historic changes in U.S. policy that will save American consumers and
taxpayers tens of billion dollars.
On the other hand, in order to reduce it inflation, Congress tries implement
supply-side policy reforms that complement the Federal Reserve's attempts to
cool demand through monetary tightening.
Furthermore, the success of The United States economy is also due to several
significant educational advancements over the years. Some key developments
include:
1. Public Education: The establishment of public education systems across states
in the 19th century, leading to increased access to education for children from
diverse backgrounds.
2. Higher Education Act: The Higher Education Act of 1965, which expanded
federal funding for higher education and established programs to support low-
income students, such as Pell Grants and federal student loans.
3. Special Education: The passage of the Education for All Handicapped
Children Act (later renamed the Individuals with Disabilities Education Act or
IDEA) in 1975, which ensured that children with disabilities have access to a
free and appropriate public education.
4. No Child Left Behind: The No Child Left Behind Act of 2001, which
introduced accountability measures for schools based on standardized testing
and aimed to close achievement gaps among students.
5. STEM Education: A growing emphasis on STEM (science, technology,
engineering, and mathematics) education to prepare students for careers in these
fields, including initiatives to increase interest and proficiency in STEM
subjects.
All these factors combined help make the US an economic power.

Analysis of a Low-income country: Morocco

Since 1993, in line with many Western world changes, Morocco has
followed a policy of privatization of certain economic sectors which
used to be in the hands of the government, and it helped it become a
major player in African economic affairs, and is the 5th largest African
economy by GDP that is equal to 131 and a GDP per capita of 3,442.0
as it knows a growth rate of 2.8.
Additionally, Morocco knows an inflation rate of 3.4 and an
unemployment rate of 13, while its trade balance equals -22642.
Multiple Key reforms Implemented in Morocco helped it dramatically
improve a vast set of socioeconomic indicators. Life expectancy had
risen to levels close to advanced economies, and the infant mortality
rate had fallen dramatically. Significant progress had been made in
raising income levels, fighting poverty, and improving access to
education. High levels of public sector investment had permitted
building high-quality infrastructure, a necessary condition for the
development of the private sector. A wave of reforms opened Morocco
to international trade, attracted foreign investments, strengthened
public finances, modernized the monetary policy framework, and
improved governance in several sectors of the Moroccan economy.
When it comes to advancements in education, one of the challenges
facing the educational system in Morocco is the high rate of illiteracy,
particularly in rural areas. Another issue is the high dropout rate,
which is influenced by poverty, lack of infrastructure, and limited
access to quality education. Therefore, in recent years, the Moroccan
government has implemented reforms aimed at improving the quality
of education and increasing access to it. These include initiatives to
enhance teacher training, improve curriculum content, and expand the
use of technology in education.

Economic conversion between the two countries:

Morocco has a recent story of investments in human and physical capital,


technological gains, market forces, government policies, and an overall pattern
of convergence is clear, compared to the United States, because a low-income
country like Morocco have GDP growth that is faster than that of the middle-
income countries, which in turn have GDP growth that is faster than that of the
high-income countries like the United States.
Many key factors contributed in this convergence because in the last decade,
Morocco has spent money and efforts investing in education and technology and
diverse industries that all contributed to the growth of the GDP.
Morocco's economy grew at an average annual rate of 4.2% over the period
1999-2017, resulting in an increase in GDP per capita of 2.9% on average per
year. This performance comes after a decade (1990 to 1999) which has
experienced a growth rate of 3% per year and a per capita GDP which has
increased by only 1.5%. This overall performance hides, however, contrasting
trends. Over the period 1999-2008, GDP grew strongly, reaching 4.8%, while
GDP per capita grew by 3.6%. The strong development of growth in economic
activity has led to positive effects in terms of improving the living conditions of
Moroccans. As proof, the population living below the poverty line at $ 1.9 a
day1 dropped from 7.5% in 1998 to 1% in 2013, according to data from the
World Bank. This implies that extreme poverty is being eradicated in Morocco.
Similarly, the poverty rates of $ 3.20 and $ 5.50 a day fell significantly from
17% and 59.3% in 1998 to 7.7% and 31.3% in 2013.

By Karimobo - Own work, Public Domain, https://commons.wikimedia.org/w/index.php?curid=9058310


References

The White House


https://www.whitehouse.gov/briefing-room/statements-releases/2022/05/10/the-
biden-harris-inflation-plan-lowering-costs-and-lowering-the-deficit/
The World Bank Open Data
https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?name_desc=true&view
=chart
Trading Economics
https://tradingeconomics.com/countries
Karimobo - Own work, Public Domain
https://commons.wikimedia.org/w/index.php?curid=9058310

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