Q.
a) Explain the following terms in the context of national economy:-
i) Gross Domestic Product (GDP). (3 marks)
ii) Primary sector. (3 marks)
iii) Secondary sector. (3 marks)
iv) Tertiary sector. (3 marks)
b) Define inflation and explain the different degrees of inflation. (8 marks)
(20 marks, 2013 Q5)
A.
a)
The three-sector theory is an economic theory which divides economies into three sectors of activity: extraction of raw materials (primary), manufacturing (secondary), and services (tertiary). It was developed by Alan Fisher, Colin Clarkand Jean Fourastié.
i) Primary sector of the economy.
The primary sector of the economy is the sector of an economy making direct use of natural resources. This includes agriculture, forestry, fishing and mining. This is contrasted with the secondary sector, producing manufactured goods, and the tertiary sector, producing services. The primary sector is usually most important in less developed countries, and typically less important in industrial countries.
The manufacturing industries that aggregate, pack, package, purify or process the raw materials close to the primary producers are normally considered part of this sector, especially if the raw material is unsuitable for sale or difficult to transport long distances.[1]
Primary industry is a larger sector in developing countries; for instance, animal husbandry is more common in Africathan in Japan.[2] Mining in 19th century South Wales is a case study of how an economy can come to rely on one form of business.[3]
ii) Secondary sector of the economy.
The secondary sector of the economy includes those economic sectos that create a finished, usable product: production and construction. This was the largest economic sector in the United States from the 1820s-1940's.
This sector generally takes the output of the primary sector and manufactures finished goods or where they are suitable for use by other businesses, for export, or sale to domestic consumers. This sector is often divided into light industry and heavy industry. Many of these industries consume large quantities of energy and require factories and machinery to convert the raw materials into goods and products. They also produce waste materials and waste heat that may pose environmental problems or cause pollution.
Some economists contrast wealth-producing sectors in an economy such as manufacturing with the service sector which tends to be wealth-consuming. Examples of service may include retail, insurance, and government. These economists contend that an economy begins to decline as its wealth-producing sector shrinks.
The field is an important source for engineering job opportunities. Among developed countries, it is an important source of well paying jobs for the middle class to facilitate greater social mobility for successive generations on the economy
iii) Tertiary sector of the economy.
The tertiary sector of the economy (also known as the service sector or the service industry) is one of the three economic sectors, the others being the secondary sector (approximately the same as manufacturing) and the primary sector (agriculture, fishing, and extraction such as mining).
The service sector consists of the "soft" parts of the economy, i.e. activities where people offer their knowledge and time to improve productivity, performance, potential, and sustainability, what is termed affective labor. The basic characteristic of this sector is the production of services instead of end products. Services (also known as "intangible goods") include attention, advice, access, experience, and discussion. The production of information is generally also regarded as a service, but some economists now attribute it to a fourth sector, the quaternary sector.
The tertiary sector of industry involves the provision of services to other businesses as well as final consumers. Services may involve the transport, distribution and sale of goods from producer to a consumer, as may happen in wholesalingand retailing, or may involve the provision of a service, such as in pest control or entertainment. The goods may be transformed in the process of providing the service, as happens in the restaurant industry. However, the focus is on people interacting with people and serving the customer rather than transforming physical goods.
The major growth in this sector also involves the transfer of funds from the governmental to the contractual profit, non-profit and hybrid sectors of the economy. Anticipated growth in the category of "personal care aides" or "home care aides" will involve increase to 1,468,000 and 1,723,900, respectively. [1]
For the last 100 years, there has been a substantial shift from the primary and secondary sectors to the tertiary sector in industrialised countries. This shift is calledtertiarisation.[2] The tertiary sector is now the largest sector of the economy in the Western world, and is also the fastest-growing sector.
Ref:
Wikipedia on 'three-sector theory' at
http://en.wikipedia.org/wiki/Three-sector_theory
Wikipedia search 'primary sector economy' at
http://en.wikipedia.org/wiki/Primary_sector_of_the_economy
Wikipedia on 'secondary sector economy' at
http://en.wikipedia.org/wiki/Secondary_sector_of_the_economy
Wikipedia on 'tertiary sector economy' at
Wikipedia on 'tertiary sector economy' at
http://en.wikipedia.org/wiki/Tertiary_sector_of_the_economy