11_Lecture_Slides_with_Graphs

11_Lecture_Slides_with_Graphs - Economics 104 Fall 2010 1...

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Economics 104 Fall 2010 1 The Economy in the Long Run Outline & Readings 1. Economic Growth — chapter 14 2. International Trade — chapter 15 3. Saving & Wealth — chapter 16 4. Financial Markets — chapter 17
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Economics 104 Fall 2010 2 The Economy in the Long Run — Economic Growth Broad objective: An introduction to and understanding of economic growth and rising living standards. 1. Economic Growth We measure economic growth in terms of output (GDP) per person. Over the last century, economic growth rates have been sufficiently high and steady to transform many economies, drastically raising economic living standards. For example, at a 2% rate of growth, output per person will double within 35 years (approx). Small differences in growth rates can have big differences in the long run.
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Real per Capita GDP (PPP) Penn World Tables (Alan Heston, Robert Summers and Bettina Aten, Penn World Table Version 6.2, Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, September 2006) 0 1 2 3 4 5 6 7 8 Argentina Australia Canada United States Netherlands India Brazil Sri Lanka Indonesia Japan China Country Average Growth Rates (%) 1951-1974 1975-2004 1951-2004 At 2%, output per head doubles in 35 years. At 5%, output per head doubles in 14 years.
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Real per Capita GDP (PPP) Penn World Tables (Alan Heston, Robert Summers and Bettina Aten, Penn World Table Version 6.2, Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, September 2006) 0.0 5000.0 10000.0 15000.0 20000.0 25000.0 30000.0 35000.0 40000.0 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Year per capita 2000 I$ Australia Canada Japan United States
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Real per Capita GDP (PPP) Penn World Tables (Alan Heston, Robert Summers and Bettina Aten, Penn World Table Version 6.2, Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, September 2006) 0.0 2000.0 4000.0 6000.0 8000.0 10000.0 12000.0 14000.0 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Year per capita 2000 I$ Argentina Brazil China India Indonesia Sri Lanka
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Real per Capita GDP (PPP) Penn World Tables (Alan Heston, Robert Summers and Bettina Aten, Penn World Table Version 6.2, Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, September 2006) 0.0 5000.0 10000.0 15000.0 20000.0 25000.0 30000.0 35000.0 40000.0 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Year per capita 2000 I$ Argentina Australia Brazil Canada China India Indonesia Japan Sri Lanka United States
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Converting Indian GDP into Canadian $ using the nominal exchange rate Nominal Exchange Rates e(INR/C$) 45.0 E(C$/INR) 0.02 Canada India P(C$/BM) Quantity Big Macs (BM) GDP(C$) P*(INR/BM) Quantity Big Macs (BM) GDP(INR) GDP(C$) 15.00 100 1500 500 100 50000 1111 GDP is identical in the two countries yet converting using nominal exchange rates understates Indian GDP.
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This note was uploaded on 01/28/2011 for the course ECON 104 taught by Professor Voss during the Winter '10 term at University of Victoria.

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11_Lecture_Slides_with_Graphs - Economics 104 Fall 2010 1...

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