The nature of the economic problem — practice question

Mexico, Indonesia, Nigeria and Turkey, called the Mints, are four emerging economies forecast to expand quickly. These four countries have fairly large populations, ranging from 75 million in Turkey to 242 million in Indonesia in 2014. Their birth rates are also high, varying from 17 in Turkey to 41.5 in Nigeria per 1000 people. Both income per head and the countries’ Human Development Index ranking are rising. However, these changes do not mean that all people in the four countries are content. As incomes rise, so do people’s wants, and what people would like to consume is greater than the maximum output the countries are able to produce. Output and consumption are rising in each of the four countries. Nigeria, for instance, is expected to rank among the world’s 20 largest economies by 2020. Productivity is increasing in most parts of the Nigerian economy, although it is still low in agriculture. Even with some security worries, more multinational companies are establishing themselves in the country because they are attracted by its growing markets. Nigeria and Turkey both recorded annual inflation rates above 8% in 2014. Indonesia’s was 5.7% and Mexico’s 5.2%. In that year, the Mexican Government used monetary policy measures to hold inflation down. In August 2014 it opened its energy market, letting private sector firms compete with the country’s state-owned petroleum firm. It also raised spending on state-provided health care, which works alongside private medical care. The four countries experienced exchange rate changes in 2014. Indonesia’s currency, the rupiah, moved from 10 685 per US$ the previous year to 11 450 per US$ in 2014. Turkey’s currency, the Turkish Lira, showed a similar pattern. Exchange rate changes can influence firms’ production costs, just as industrial action can. In June 2014 Turkish trade unions arranged several strikes in an attempt to secure better wages and working conditions for their members. However, Turkish trade unions have limited power because of restrictive trade union laws and low membership, with only 9% of workers in trade unions. As a result, collective bargaining is not a major feature of Turkish labour markets and Turkish trade unions have little influence on economic policy.