...Learaye Macroeconomics Economic Growth & GDP “Gross domestic product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of neither public debate not the integrity of our public officials. It measures neither our courage nor our wisdom, not the devotion to our country. It measures everything, in short, except that which makes life worthwhile and it can tell us everything except why we are proud to be Americans.” Quote by Robert F. Kennedy GDP GDP is not a measurement of overall prosperity of a nation and it fails to measure some aspects of a national economy. As you can gain from the quote by Robert F. Kennedy, we do not use this to measure those things which “make life worthwhile” but rather use it to judge one country from another. It helps to evaluate how societies function in different economic environments and how to use this measurement to improve conditions in a society or to keep things flowing for a healthy economy. Gross Domestic Product (GDP) is defined as the total market value of final goods and services produced by factors of production. GDP also measures markets of what is being produced or whether problems are occurring. There is a relationship presented with a circular flow model that gives us a picture of the flow of production being produced in an economy. The circular flow model demonstrations...
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...How important is economic growth? Does it really make people better off in the long run? Or, as the question is sometimes misleadingly put, “Can money buy happiness?” a) Why is that last question misleading? Answer: Economic growth is the increase of real GDP (gross domestic product) in a given year, i.e. the rise in the country’s production of services and goods, adjusted with inflation rate. It means that economic growth reflects how well the county’s citizens improve their well being and standard of living. Economic growth is important because it builds the basis for the country’s citizens' future and ensures that societies move in a productive direction. It enables development in all areas of business, science and society, and advance in all areas of life. It is supposed to mean more comfortable and secure life and better public situation. But it does not always have to be that simple. The countries which are traditionally supposed to be wealthy countries and whose citizens are well-off, may have very low (even below 1%), 0% or even negative economic growth (like in the eurozone in 2012 where the economic growth is -0.3% in 2012). On the other hand, there may be countries which enjoy high economic growth and in spite of this, their citizens live in poverty – like Brazil after World War II where in spite of 16% economic growth people lived in poverty. Therefore economic growth itself does not make people better off in the long perspective. What really matters and...
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...Sustainability Alternate measure for Economic Performance Jayant Kumar Preface An indicator is something that helps one to understand inclusive position, the path and how far one is from the point they want to be. A good indicator gives the alert about the problem before it gets too bad and helps to recognize things to do in-order to fix it. Indicators of sustainable community point to areas where the links between the economy, environment and society are weak. It allows one to identify the problematic area and helps the ways to fix restore it. GDP and profit currently dominate society’s discussions of economic performance. They shape the way people think about the economy and business, affecting their behavior and the actual outcomes of economic activity. So what is economic success? Going beyond GDP and profit will explore what we mean by economic success, the role that GDP and profit play in this, and the potential for broader measures of economic success to help us balance our economic priorities, our social goals, and the constraints imposed on us by the natural environment we live in. 1 Current measure of Performance Right measurement is a powerful instrument for social progress; wrong or imprecise measurement a source of hazard and even havoc. Two main measure of economic success are currently are GDP at the national level and profit at the Organizational level. GDP is the value added measure that is broader than Profit. GDP and profit are contested concepts that...
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...II. THE LONG RUN Chapter 3: Overview of Economic Growth 3.1 Introduction • In this chapter, we learn: – Some facts related to economic growth that later chapters will seek to explain. – Some tools used to study economic growth, including how to calculate growth rates. 3.2 Growth over the Very Long Run • Sustained increases in standards of living are a recent phenomenon. • As a result per capita GDP differs remarkably across countries. • The Great Divergence: the period from 1700 to today • Before 1700 – Per capita GDP across countries differed only by a factor of two or three. • Today – Fanning out of per capita GDP – Cross-country it differs by a factor of 50! • From 1870 to 2012, US per capita real GDP rose by a factor of 17. 3.3 Modern Economic Growth The Definition of Economic Growth • We define the rate of economic growth between two periods as the percent change in per capita GDP (in real terms) between those periods. • Percentage change in GDP between period t and and t + 1 “new” GPD “old” GPD • Say per capita real GDP was $20,000 in year 1990. We know it increased by 10% (10/100 = 0.1) between 1990 and 2000. What is the 2000 value? • Applying the growth rate to find next period’s value: growth rate • Suppose y grows 2% each year. – NB: That is an accumulated 49% over 20 years. • The constant growth rule: time period variable value in period t initial variable ...
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...embedded objects like formulas and some graphs as well as showing the best foramatting. Note 2: for non-honors students. The material and the order of the material may vary somewhat from that presented in the regular sequence. CHAPTER 1: CIRCULAR FLOW AND GDP The Circular Flow Model Our next economic model represents the main participants in the economy and how they interact. The two main sectors of an economy are the households and the producers. Producers make the goods and services and sell them to households, but in order to make the goods and services they first need inputs or the factors of production. There are four factors of production and each receives payment for its participation in production: labor is paid wages, capital is paid interest, land is paid rent and entrepreneurship is paid profit. There are always two directions to the flows in the economy – the money to purchase something is moving in one direction, the good or service being purchased is moving in the opposite direction. Households sell the four inputs to the production sector and receive payment back. Households then spend most of their income buying the goods and services produced by the production sector; what the households don’t spend they save. The production sector and government access those savings by borrowing in order to finance purchases. In addition both the production sector and government spend part of their income buying goods and services. Foreign businesses...
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...Economic growth Economic growth is the increase in the amount of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP. Growth is usually calculated in real terms, i.e. Inflation-adjusted terms, in order to obviate the distorting effect of inflation on the price of the goods produced. ( Wikipedia, 10th december 2012) Executive summary- Economic growth is the growth what every economy and country are desperate to achieve for the sake of the country’s population. The aim is produce more and goods in order to increase the standard of living simply by increasing the wages of mass population. Increasing standard of living is to provide quality food, better and better service and education, latest technology in order to ease everyday’s life. The expectation in order to achieve faster growth are usually are on the rise in the hope of building better and prosperous country. Economic growth is considered to be a positive to be a positive side of an economy but at what extent? A countries economic growth is visible by its infrastructure, urban development, globalization, higher education rate; create employment and higher wages for poor worker and many other positive changes. When the demand of economic growth there are a few who thinks of the negative effect it might have. There are many negative concerns about faster economic growth and this is environmental issues, sometimes...
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...Test 2 ECO 320 Economics of Development Chapter 1 1.Developing countries share some features (low levels of income, etc.), but they are quite different in many respects. Explain what we mean by “institutions” and how is it that developing countries different in institutional development. How would the differences in the development of institutions make it more difficult to formulate policies for development and theories of development? 2.Is there a fixed set of prerequisites for development? Explain. Chapter 2 3.Comment on the following statement: The level and growth rate of real GDP per capita can be a misleading indicator of development. At the same time, countries that experience sustained increases in real GDP per capita over time will tend to be more developed. 4.Why is an understanding of what “development” means crucial to policy formulation in developing nations? Why do you think a country may have difficulties in agreeing on a rough definition of development? 5.Why do we use “purchasing power parity” measures when comparing incomes across countries? 6.Suppose that you had to explain this graph to someone who is not a “visual learner” – he just doesn’t get pictures. You have to explain every feature of the graph using words. 7.What are the components of the Human Development Index? What are some strengths and weaknesses of the HDI as a comparative measure of human welfare? 8.Discuss the Millennium Development Goals. How can the mere...
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...4. ECONOMIC DEVELOPMENT: A CHANGING FOCUS 4.1 Introduction The large impact of TFP growth on economic growth (on average 56.5%) found in the previous section provides a sign that there were also other factors, besides physical capital, which were important for economic growth. However, because TFP growth is calculated as a residual, it is unclear which factors are captured by TFP growth. Whether this was technology, as was often assumed, or whatever other factor, could not be decided based on this evidence. This was less a problem in early development economics when development was looked upon as (lack of) physical capital accumulation (see for example Lewis 1955). As physical capital accumulation was inserted in the growth accounting exercise, the TFP growth could simply be interpreted as technological growth. Yet, with the rising importance of other, social, indicators such as health, literacy, and human capital, the growth of TFP could reflect the growth of these social indicators as well. 4.2 A classic view: GDP and physical capital On the basis of per capita GDP data provided by Maddison (2003), we may conclude that the levels of per capita GDP were about equal in India, Indonesia, and Japan around 1800. However, in the course of the nineteenth century they started to diverge. In 1890 Japan was already clearly ahead, having a gap in per capita GDP of 35% with Indonesia and 65% with India (see figure 1.1). Indeed, figure 1.1 shows that from 1870 onward there...
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...hours of homework time and most of the students receive a high grade in the class if they use them and get an early start on these difficult written assignments. Here is some advice to help you also. With all of these written assignments in the class, read the directions and study aides closely before actually starting the work. Read the directions first. Many students wait until the last night before it is due and have a difficult time getting it done. Be sure to scroll to the bottom of this document for important information. Here is the rubric for this assignment. M 2 / Assignment 2 Grading Criteria | Maximum Points | Points Earned | Researched the data correctly and answered each question in a complete and accurate manner. Sixteen points for each question, 1-5. | 80 | | Wrote in a clear, concise, and organized manner; demonstrated ethical scholarship in accurate representation and attribution of sources; displayed accurate spelling, grammar, and punctuation. APA formatting is used with a title page, APA page numbering, and a reference page. | 20 | | Total: | 100 | | We are requiring APA formatting on all assignments. No appendix introduction or conclusion in needed. Title page, page numbering, reference page, Times New Roman, #12 font, double spacing are required according to APA standards. Also, the questions followed by the answers are required. M2-Assignment 2: What is Gross Domestic Product? Go to the following website: www.bea.gov/index.htm There...
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...hardware warranty, Acer one year international travelers limited warranty g. Installation Offered: HP windows 8 os, Norton internet security 2012, hp games; Acer windows 8 os h. Recycling of Old Components Offered: HP offers information on recycling different products in your local area, Acer also has a recycling program with information on how to dispose of components in your area. 2) What are some factors that can impact the gross profit of a merchandise company? There are many different factors that can impact the gross profit of a merchandise company including an increase in supplies, labor, and taxes. Anything that increases the cost of producing a product or providing a service affects the gross profit of the merchandise/service. In many markets, companies do not have the ability to increase the price of their product just because of increase in production costs, thus costing them profit. 3) One item that can help investors measure how effectively a business is using its assets to generate sales is the ratio of net sales to assets. The calculation explanation for this financial ratio is found on page 275 of the textbook. Use the following links to find the financial information needed to calculate the net sales to assets measures for your two selected companies. Which company has...
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...© 2010 Pearson Education Canada Will the Canadian economy weaken through the next year and shrink, or will it remain strong and expand? To assess the state of the economy and to make big decisions about business expansion, firms use forecasts of GDP. What exactly is GDP? How do we use GDP to tell us whether our economy is in a recession or how rapidly our economy is expanding? How do we take the effects of inflation out of GDP to reveal the growth rate of our economic well-being? And how to we compare economic well-being across countries? © 2010 Pearson Education Canada Gross Domestic Product GDP Defined GDP or gross domestic product is the market value of all final goods and services produced in a country in a given time period. This definition has four parts: Market value Final goods and services Produced within a country In a given time period © 2010 Pearson Education Canada Gross Domestic Product Market Value GDP is a market value—goods and services are valued at their market prices. To add apples and oranges, computers and popcorn, we add the market values so we have a total value of output in dollars. © 2010 Pearson Education Canada Gross Domestic Product Final Goods and Services GDP is the value of the final goods and services produced. A final good (or service) is an item bought by its final user during a specified time period. A final good contrasts with an intermediate good, which is an item that is produced by one firm...
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...The Economics of Growth LEARNING OBJECTIVES After reading and studying this chapter, you should be able to: ̈ Understand that economic growth is due to growth in inputs, such as capital and labour, and to improvements in technology. ̈ Understand that capital accumulates through savings and investment. ̈ Understand that the long run level of output per person depends positively on the savings rate and negatively on the rate of population growth. ̈ Understand that the basic economic growth model predicts that standards of living in different countries will eventually converge. 61 62 PART 2 The Economy in the Long Run and the Very Long Run e have enormously higher incomes than did our great-grandparents. People in industrialized nations are far wealthier than people living in less developed countries. In fact, North Americans and many Europeans had higher incomes a century ago than people in poor countries do today. What accounts for these vast differences? What will determine our standard of living in the future? Growth accounting and growth theory answer these questions. Growth accounting explains what part of growth in total output is due to growth in different factors of production (capital, labour, etc.). Growth theory helps us understand how economic decisions control the accumulation of factors of production, for example, how the rate of saving today affects the stock of capital in the future. Figure 4-1 shows GDP for...
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...Project—— The real meaning of GDP I. Background Since 1985, when the State Council of China approved to establish a System of National Accounting (SNA), using the gross domestic product (GDP) to measure the national economy, more and more people are getting familiar to this word. We must have heard about it for countless times. At the end of 2010, China has overtaken Japan as the world's second biggest economy in terms of GDP, which has drawn attention all around the world and has made Chinese people proud of the rapid development over the past decade. However, there are still a large quantity of people in China or even in the world that know nothing about GDP. Moreover, still many people do not fully understand the real meaning of GDP even they have heard about this economic term before. GDP per capita is often considered an indicator of a country's standard of living whereas there are limitations and criticisms against the belief that GDP measures a country’s living standard. Many economists (for example, who? Add sources) argue that GDP is an empty abstraction devoid of any link to the real world, and, therefore, has little or no value in economic analysis. Many environmentalists (for example, who? Add sources) argue that GDP is a poor measure of social progress because it does not take harm to the environment into account. Thus, it is important to find out the real meaning of GDP and its value to economic analysis. II. Statement of the problem First , this report intends...
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...Oil Prices’ Impact on Economic Growth Since 2008, the U.S. has seen one of the slowest recoveries from a recession since the Great Depression. Never before since World War II has either inflation adjusted GDP or unemployment rate been below where it was four years after a recession began. Our economy in this recovery could have grown and created jobs at the average rate like the 10 previous postwar recessions. GDP per person could be $4,528 higher and 14 million more Americans would be working today (Gramm and Solon). Economists claim that the lack of strength in the recovery was due to the depth of the recession and underestimating the severity of the economic disaster. Another speculation is that the financial crisis, by the very nature is a much slower and more difficult recovery. A recession is generally defined as a decline in GDP growth in a six-month period. So what can keep the GDP, or the value of all consumed goods, from returning to a healthy economic state? Oil is a primary source of energy we use everyday. The more oil we use, the faster the economy grows. Over the last forty years, a 1 percent hit to the world oil consumption has led to a 2 percent increase in GDP. That means if GDP increased 4 percent a year, like before 2008, oil consumption was increasing by 2 percent a year (Anandan, Ramaswamy, and Sridhar). Statistically, in 2006 figures display that the average oil price was $67.65 per barrel. In 2008 when the recession hit, the average oil price was...
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...Population-Control-Policies and their Implications for Economic Growth in China Bachelor’s Thesis supervised by the Department of Economics at the University of Zurich Prof. Dr. Fabrizio Zilibotti to obtain the degree of Bachelor of Arts in Economics Author: Noemi Schramm Course of Studies: Economics Closing date: August 17, 2011 Abstract This bachelor thesis is giving an overview on previously performed research how family-planning-policies in China (explicitly the so-called One-Child-Policy) have affected economic growth since 1979 and tries to give possible predictions and forecasts on how it could affect economic growth until 2050 through critical model analysis. The Solow model gives theoretical answers but also yields analytical results through calculations subject to different population development scenarios (low, middle, high growth rates). The dependency ratio as a measurement of population age structure is analyzed and implemented into the Solow model to help understand the influence of family-planning-policies. It is shown that the One-Child-Policy affected heavily the last 32 years of China’s economic development and will continue to affect its future, but according to the calculations in this paper, the impact changes from a positive one to a negative one. Acknowledgements I would like to thank Professor Fabrizio Zilibotti for his supervision and for giving me the opportunity to write my thesis at his chair. Especially I would like to thank Yikai Wang for...
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