Qno 1 Economic growth means an increase in real national income / national

output.
Economic development means an improvement in quality of life and living
standards, e.g. measures of literacy, life-expectancy and health care. ... Higher real
GDP, enables more to be spent on health care and education
Structural Changes of Economic Development:
Economic development represents following structural changes in various sectors
of the country:
There is a change in the occupational structure. In economic development
there is decrease in the share of labour force in primary sector (farming, fishing
and mining etc.) and increase in the share of labour force in secondary sector
(industry etc).
There is a change in the structure of national output. The contribution of
primary sector in the national output falls and the share of secondary and
tertiary (3 rd) sector slowly go up.
There is a change in the structure of industrial production. There is an
increase in the production of capital goods and decrease in the production of
consumer goods.
There is a change in the structure of foreign trade. The share of primary
goods in exports decreases and the share of capital goods in imports increase.
Accordingly, in economic development there is an increase in exports of
manufactured and final goods. Similarly, there is decrease in the imports of
consumer items.
There is a change in the structure of technology. In the economic
development modern and advanced techniques are used in all the sectors of
economy.
There is a change in the social and institutional sector. Due to economic
development there is an increase in the self-esteem and living standard of the
population.

Conclusion:
We conclude that, normally the terms economic growth and economic
development are used for the explanation of encouraging changes in the
economic achievements of a country.
Qno 8There are two different approaches to tackles the population problem.
1. By increasing G.D.P:
For improving the living standard and providing better facilities to the people it is necessary that all the
resources available in the country should be full utilized, so that no one should be useless. For example, to
increase agriculture output following measures should be adopted, i.e. use of modern technology, use of
fertilizer and spray of pesticides, availability of better seeds, soil preservation, better irrigation facilities,
change in life style of rural people and full utilization of forest and minerals resources. Moreover, in the
industrial sector, supply of raw material, availability of fianc and technical knowledge are necessary. In
the same way in other sector of the economy, steps should be taken to improve the labour efficiency so
there should be over all increase in production and an increase in per capita income.
2. By controlling Population:
To tackle the problems of excessive population growth the government should adopt positive population
control policies along with basic needs activities for development. The best and effective way of
population control is through a reduction in birth rate that is known in our country planning. By
population planning we do not mean that there should not be any marriage or no child or illegal abortion,
but we only mean a healthy gap between the birth of children so that each child could be provided better

health, food, clothing and educational facilities to enable him to be better citizen. In term developed
countries there is shortage of resources and hence a reduction in birth rate in necessary so that living
standard of the existing population could be increased and they could be provided better economic
facilities. Pakistan is facing high growth rate of population and it is going to be doubled in 23 years. So
population planning is necessary to overcome this series problem. If we glance over the history of
developed countries we can point out many countries which have enjoyed the fruit of economic
development by an effective control of population.
Qno 9Capital Formation:
Capital formation is the process of building up the capital stock of a country
through investing in productive plants and equipments. Capital formation, in other
words, involves the increasing of capital assets by efficient utilization of the
available and human resources of the country.
Sources of Capital Formation and Importance:
The stock of capital goods can be built up and increased through two main sources:
(1) Domestic Resources and (2) External Resources.
(2) External Resources:
External resources has following types:
a)
Foreign aid:
Foreign aid is an important source of capital formation in Pakistan. Government
of Pakistan receives foreign aid from international financial intuition and advanced
countries of the world and collects more and more sources for capital formation in
the country.
b) Restriction on important of luxury goods:
Restriction on import of luxury goods save precious foreign exchange earnings and
if those foreign exchange earnings are used for the import of capital goods then
such steps will promote capital formation in the economy.
(i) Foreign Economic Assistance. There is a controversy over the impact of
inflow of capital for the development of a country. It is argued that capital is one of
the variable in the growth process. If the government of a country is ineffective and
people are not receptive to social changes, the inflow of capital resources and
technical assistance would go waste.
In case, the developing nations needing foreign capital and technical assistance
have the will to absorb capital and technical knowledge and the social and political
barriers are overcome, capital then becomes the touchstone of economic
development. The main benefits of the foreign economic assistance, however, in
brief are as under:
(a) Foreign loans bridge saving gap. In Pakistan, like most of the developing
countries, the domestic saving average 14% of GDP. The low rate of saving is not
sufficient to achieve the desired rate of growth in the country. Foreign loans

supplement domestic savings and help in bridging the resource gap between the
desired investment and the domestic savings.
(b) Close the trade gap. In Pakistan, the export earnings are persistently falling
short of import requirements. The foreign, exchange gap caused by excess of
import/export is being filled up with inflow of capital.
(c) Provides greater employment opportunities. The financing of
various projects with the help of foreign assistance provides greater employment
opportunities in a country.
(d) Increase in productivity of various economic sectors. The inflow of capital
and technical know-how increases the productive capital of various sectors of the
economy.
(e) Increase in real wages. The foreign resources help in increasing marginal
productivity of labor in the recipient country. The real wages of the workers are thus
increased with the help of foreign assistance.
(f) Provision of higher products. The foreign capital helps in the establishment
of industries in the country. The inflow of technical knowledge improves the quantity
and quality of manufactured goods and makes them available at lower prices to the
domestic consumers.
(g) Increase in tax revenue. The profits earned on foreign investment are taxes
by the government, The revenue of the state is thus increased.
(h) External economies. The inflow of foreign capital and advanced technology
stimulates domestic enterprises. The firm avails of the benefits of external
economies like that of training of labor, introduction of new technology, new
machinery, etc., etc.
(ii) Donor Country and the Economic Assistance: Here a question can be asked
.as to why the developed nations are kind in giving aid to the developing countries?
According to the rich nations, the foreign aid is given for a combination of
humanitarian and self-interest reasons:
(a) Humanitarian ground. If a country is faced with famine, drought, epidemic,
diseases, earthquake etc., it is obligatory for the developed nations to help that
country financially purely on humanitarian grounds. The rich countries are
extending economic assistance in the form of grants to the poor nations of the
world.
Domestic sources.
a)
Voluntary savings:
Voluntary savings is an important source of capital formation. Household and
business sectors save a part of their current income which is then used as a source
for capita; formation in the country.
b) Involuntary savings:

Involuntary savings are made in the form of taxes by the government on general
public. Government generates resources through taxes which are then used for
capital formation.
c)
Government borrowing:
Another domestic source of capital formation in Pakistan is government borrowing.
The government issues short term and long term bonds to commercial banks and
general public and collects resources which are used for capital formation in the
country.
d) Use of idle resource:
Use of idle resource of capital formation. Which the domestic idle resources are
properly used rate of capital formation can be increased. For example in villages
side employment rate is very high if the government engages unemployed people
in the construction of roads, Schools College and dams etc then capital formation
can be increased in the economy.
Qno 15 Fiscal policy:
Fiscal policy is prepared by the federal government.
Definition fiscal policy:
Fiscal policy is mainly concerned with the process of shaping government taxation
and government spending so as to achieve certain objectives.
Tools of fiscal policy
The tools of fiscal policy as under
i.
Taxation:
It one of the main source of revenue for the government. There are different kinds
of tax as under
a.
Direct tax:
It is directly paid by the tax payer like income tax.
b.
Indirect tax:
It is not directly paid by the tax payer like sale tax.
ii.
Expenditure:
Government incurred a number of expenditure such as expenditure on keeping
general administration, defenses, development expenditure etc.
Objective of fiscal policy:
Following are the main objective of fiscal policy.
I.

To remove regional disparity.

II.
To eliminate or reduce the gap between nice and poor.
III.
To promote employment opportunities.
IV.
To increase investment.
V.
To promote social welfare.
VI.
To increase employment opportunities.
VII.
To accelerate economic growth
VIII.
To make possible maximum
IX.
Exploitation the available resource by increasing expenditure in the
less development areas.
Qno 13 The meaning of economic planning differ from country to country
and person to person. Keeping in view the various definitions we can say that

aim of all the plans is to utilize the available resources more effectively achieving
the well defined objectives during given period of time.
Importance or Objectives or Advantages of Planning
1. In crease in National Income :The objective of planning is to utilize the resources of the country in such a manner that it should increase
the size of national income. In the developing countries planning is very useful for increasing the
production of the country.
2. Superior Decisions :The decision of planning authority are more superior as compared to the individuals. Planning authority
keeps in view the interest of the whole nation. It prepares the plan keeping in view the economic
condition of the country.
3. Achievement of Full Employment :In the less developed countries and in the advanced countries the objectives of planning is to achieve the
full employment.The main objectives of the planning to create jobs for the people of the country.
4. Equal Distribution Of Wealth :In the capitalistic countries the gap between rich and poor is increasing. It creates social evils. Through
planning we can reduce the inequalities in income.
5. Elimination or Regional Disparity :Through planning the regional economic disparities can be removed. In the plan special fund can be
allocated for the development of backward areas. It is the one of main objective of planning that there will
be reduction in the regional disparity.
6. Improvement in The Balance Of Payment :The balance of payment of developing countries remains deficit. It adversely affects the rate of economic
growth. Through planning government can reduce the imports and can increase the exports.
7. Balanced Economy :If one sector of the economy is developed the country will not achieve maximum rate of development.
Through planning resources of the country can be allocated in such a manner that it provides balance to
the economy.
8. Control of Economic Crises :Due to economic crises, economy faces many problems. Through planning depression can be controlled
and production can be increased.
9. Solution of Over Population :When the size of population is greater than the size of natural resources it can be adjusted through
effective planning.
10. Self Sufficiency In Food :Each country wants to become self sufficient in food. So this objective is also achieved through planning.
In the each development the target was proposed for the agriculture sector.
11. Industrial Development :Today without industrialization no any country can improve its economic condition. For the establishment

of new industries, planning is very effective.

12. Increase In welfare Program :The provision of social services is main aim of the planning. For example some developing countries plan
various facilities like housing, schooling, transport and water provided to the people.
13. Increase In Capital Formation :Without increasing the rate of capital formation, we can not increase the rate of development. In the less
developed countries rate of saving is very low and due to this rate of investment is low. Through effective
planning we can increase the rate of savings in the country.
14. Elimination of Poverty :Through planning we can increase the rate of economic development in the country. National income and
per capita income will rise and poverty will remove.
Qno 13Role/importance/contribution of foreign trade to economic
development
Foreign trade plays a vital role in the economic development of a country. Its
important can be judged from the following points.
1.
Specialization in production:
Foreign trade leads to specialization in the production of those goods which a
country can produce at lower cost. This situation improves the overall welfare of the
people.
2.
Quality goods at lower rates:
If a country cannot produce a specific commodity then it can import that commodity
at lower rates from international market in the presence of foreign trade.
3.
Flow of capital goods and technical know-how:
In the presence of foreign trade flow of capital goods and technical know-how take
place which increase the rate of economic growth and development of the country.
4.
Removal of shortage of goods:
Foreign trade is helpful for the removal of shortage of goods. If there is shortage of
any commodity then that commodity can be imported from the international market
which will eliminate shortage of good.
5.
Industrial and agricultural development:
Foreign trade brings improvement in industrial and agricultural sectors of the
economy. The necessary inputs of industrial and agricultural sector can be imported
which will develop both the sectors of the economy.
6.
Discourage the formation of monopolies:
Foreign trade discourages the formation of local monopolies. The local producers
cannot exploit the consumers because of fear of cheap imports. In the absence of
imports, some local firms may create monopoly and charge very high prices.
7.
Quality important of local products:
The foreign competition helps to improve the quality of local products. If Pakistani
government allows cycles to be improved, the quality of Pakistani cycles will
definitely improve.
8.
Optimum utilization of resources: International trade helps in the
optimum utilization of resources. A country specializes in the production of those
goods for which its resources are more suitable and as a result the resources are
properly utilized.
9.
Price stability:

Foreign trade helps in the price stability of a country. If the price level is very high of
a commodity then that commodity can be imported which will keep price in stable
position.
10. World peace:Foreign trade promotes price in the entire world because in the
presence of international trade people of different countries come close together
and they become interdependent.
11. Increase in national income: In the presence of international trade
the resources are properly utilized which increase exports of the country and as a
result per capital income and national income increase.