Cambridge International as and a level Economics Ebook

Asian 
country
Economic 
growth 
rate (%)
European 
country
Economic 
growth 
rate (%)
Malaysia
4.8
Germany
0.5
Pakistan
6.1
Greece
−
3.6
Singapore
3.7
Norway
1.3
South Korea
2.7
Poland
1.5
Thailand
3.0
UK
1.8
Table 9.1 
Economic growth rates for selected Asian and 
European countries, 2013
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Cambridge International A Level Economics

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Some idea of the 
shadow economy
can be found by 
measuring any gap between GDP as measured by the 
expenditure and income methods. Th
is is because people 
will be spending income they have not declared!
Shadow economy: 
the output of goods and services not 
included in off icial national income figures.
KEY TERM
If the size of the shadow economy is relatively constant, 
the rate of economic growth may be calculated reason-
ably accurately. However, even a shadow economy can 
make international comparisons of economic growth 
rates diffi
cult. Th
is is because the size of the hidden 
economy varies between economies. It is infl uenced by 
the marginal rates of taxation, the penalties imposed for 
illegal activities and tax evasion, the risk of being caught 
and social attitudes towards, for example, diff erent 
illegal activities.
Offi
cial GDP fi gures may also not provide an accurate 
measure of output and changes in output because of low 
levels of literacy, non-material goods and services and 
the diffi
culties of measuring government spending. In 
countries with low levels of literacy, it will be diffi
cult for 
the government to gather information about all economic 
activity. Some people will be unable to fi ll out tax forms 
and others will fi ll them out inaccurately, so estimates 
will have to be made for some output. Th
is is a particular 
problem in Pakistan, which had an adult literacy rate of 
just 58% in 2013 with females having a literacy rate of 45%.
Estimates also have to be made for non-marketed goods 
and services. Th
e GDP fi gures only include marketed 
goods and services, that is goods and services that are 
bought and sold and so have a price attached to them. 
Goods and services that are produced and that are either 
not traded or are exchanged without money changing hands 
go unrecorded. For example, domestic services provided 
by homeowners, painting and repairs undertaken by home 
owners and voluntary work are not included in the offi
cial 
fi gures. Th
e proportion of goods and services that people 
produce for themselves and the amount of voluntary work 
undertaken vary over time and between countries.
In comparing economic growth rates, it is also 
important to consider the nature of economic growth. 
A very high rate of economic growth may initially appear 
to be very impressive. However, it may not be possible 
to sustain this for any length of time if non-renewable 
resources are depleted and pollution is created that reduces 
the fertility of the land and the health of the labour force.