E2_WhyAreSomeCountriesRichOthersPoor_Student

E2_WhyAreSomeCountriesRichOthersPoor_Student - Why Are Some...

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Why Are Some Countries Rich Why Are Some Countries Rich and Others Poor? and Others Poor? Reading: Frank/Bernanke Chapter 7
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First Question Why Are Some Countries Rich and Others Poor? A country’s standard of living depends on its ability to produce goods and services Rich countries are …………. Poor countries are not able to produce
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Which Country Is Richest? Look at Statistical Abstract. In 2009 edition the table is 1305. GNI (Gross National Income) same as GDP but derived by alternative method. GDP per capita. In dollars divided by mid-year population Atlas Method – “Synthetic” exchange rate over 3 years and adjusted for G5 inflation Purchasing Power Parity Method – official current exchange rate.
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Rankings: Top of the list.
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Rankings: Bottom of the list. Scale comparison: Microsoft’s sales in 2008 were $60.4 billion. If made a country would rank #58 in world.
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Second Question Currently, U.S. federal government spends more money than it takes in. Possible choices to fix this are: Reduce spending ………. . Borrow and shift problem to younger generations. Can we create another choice?
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These Questions These questions have been around since the very first economists. One the earliest economists, Jean Baptiste Say, believed that what a country produced was based on: the amount of ……. it had, the number of people ( labor ), its’ factories ( ………. ) plus the number and quality of risk-taking entrepreneurs.
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Jean-Baptiste Say 1767-1832 Born in Lyons to a Huguenot family of textile merchants. Was an ardent Republican. His most famous work, “Treatise on Political Economy” (1803). Treatise articulated the economic idea of laissez-faire . Laissez-fair means that the government should not interfere with the economy. By leaving the economy along, the economic pie would naturally end up as large as possible.
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Cross National Growth Rates
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What Does Table Say? Some countries have HIGH GROWTH. Japan (1890 to 2000) Real GDP increased from $1,256 to $26,460 or 2.81% per year Some countries have MEDIUM GROWTH. USA (1870 to 2000) Real GDP increased from $3,347 to $34,260 or 1.81% per year. Some countries have LITTLE OR NO GROWTH. ……………. (1900 to 2000) Real GDP changed from $616 to $1,960 or 1.16% ……………. (1900 to 2000) Real GDP changed from $520 to $1,650 or 1.16%
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Why are the growth rates in the table’s last column important? Growth rates help determine a country’s economic path or trajectory. Countries with high growth rates become ….
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E2_WhyAreSomeCountriesRichOthersPoor_Student - Why Are Some...

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