UNCW Economics 429 Growth and Development Fall 2017 – Flashcards
Unlock all answers in this set
Unlock answersquestion
Economic growth" vs. "Economic development"
answer
Growth- The increase in income (output) on a per captia bases [each person has more stuff] must happen first at inception Development- change in human well being Well being- Heath, education and happiness
question
Can you Have development or growth on its own?
answer
Yes Development that does not yield growth
question
Characteristics of high-income nations - what basic factors are necessary for a nation to develop?
answer
The Characterstic oppostie of low income nation "inverse of Africa" Stable Good Infrastructure Good means K accumulation High energy usage Low agriculture employment and rural areas dwelling Higher highschool enrollment (Edu measure) Lower gender income disparity
question
Measures of economic growth (change in GDP per capita, change in GNP per capita)
answer
Change in GDP Per capita= how much value of Final (G+S) per person is increasing or decreasing overtime Change In GNP per captia= The GDP + Net Income GDP per capita is value of all final output produced in a year within physical borders of a country. GNP per capita is value of all final output produced in a year by the citizens of a nation.?
question
GDP GNP GNI
answer
GDP= Gross Domestic Product- The total G+S's produced by country (within borders) GNP= Gross National Product- The total G+S's produced by countries citizen (regardless of where) GNI- Gross National Income- The GDP + Net Income of assets held aboard Which used in UN?????
question
Why/when was GDP first calculated?
answer
Simon Kutznez- 1934 1. not measure of well bing 2. common across most nations calculate back 1846 till now The idea was to capture production by households, companies and the government in a single measure
question
How to Calculate RGDP
answer
RealGDP= NominalGDP/(CPI/100)
question
3 Errors of GDP
answer
Categorized into overestimates and underestimates Over- 1. Per cap GDP is average this can lead to skewing from outliers notable in the upward direction (also down though) 2. GDP measures the positive(+) of society without measuring the (-)negatives Underestimate 1. If the production not in formal market it goes unaccounted for (house hold work, black market, environmental)
question
GDP between a rich and poor nation be an Inaccuracies when comparing the two nation's wellbeing?
answer
Wellbeing is measuring output. 1.A big nation may be producing a same quantity with less efficiency 2. House hold production- Rich- less Poor - Greater Both go unaccounted for
question
How do we compare per capita GDP between two nations?
answer
Convert to common currency using an exchange rate- Set it up like moles and convert Example 1Dollar=3ESD Dollar Amount *(3 ESd/ 1Dollar) Flaws- This does account for 1.Non Tradable goods ( do not flow across borders) 2.Not represent Purchasing Power 3. Supply and Demand unaccounted
question
Why might using official exchange rates for this comparison result in erroneous conclusions about the relative wellbeing of the two nations? Will we overestimate or underestimate the true standard of living?
answer
Official Exchange rate only accounts for tradeable goods. 1.Does not account non-tradable goods (environment) 2. Supply and Demand 3. Purchasing Power- How much the dollar goes We will underestimate the poor countries and overestimate the rich ones
question
Purchasing power parity (PPP) and PPP exchange rates. What does PPP mean? How are PPP exchange rates calculated? How are they used?
answer
Purchasing Power Parity- Exchange rate the accounts for tradable and tradable goods 2 equation (Not sure which) 1. Purchasing power exchange rate= (PPP X rate/ Official Exchange Rate) 2. Purchasing power exchange rate= E(Qi*piA)/(Qi*PIB) [2 makes the most intuitive sense]
question
HDI
answer
Human Development Index- UN uses to gauge current standing relatively to other nations 3 dimensions Health Income Education Goal Posting Method
question
Process HDI
answer
In a nutshell 1. Calculate 3 dimmesions (ED hard) 2. Factor in the indicies 3. Take Geometric mean 4. Goal post across countries 1.Calculate each countries 3 dimensions 2. Average of the 3 dimensions (hH+ hE+hI)^1/3 A.Health- (LEi-LEmin/ LEmax-Lemin) LE- Life expectancy B.Income Hi= ln(PPP per cap GNI)- ln(100)/ln(PPP per cap GNIMax-ln(100) C. Education- (Myrsi-Myrsmin/Myrsmax-Myrsmin) M= Mean Yrs= Year After ward- take mean He= (He1-He2)^1/2 2.5 Factor in the indices Inequality (IHDI) Gender Inequality (GII) Multi Dimensional MPI 3. Afterward Geometric Mean to factor the subindicies #ofn squarerooted(n1*n2...etc) 4. IS this right before 3? (Countryi-Worldmin/ Worldmax-Worldmin)
question
Different Indicies
answer
Inequality IHDI- Discounts for inequality Gender Inequality Index - 3 Reasons 1. Reproductive 2. Empowerment (Govt seats and education ) 3. Labor Force Participation Rate LFPR
question
Why Goal Posting Important
answer
We goal post because we are looking at overall change in output relative to other countries. Goal posting lets the UN compare countries to each other. This is empirical backed but not hard numbers.
question
Indicies allow for HDI
answer
1.Tracking of dynamic model 2. Identification problem countries 3.Analyze the data A. Explanatory (X) B. Dependent (Y)
question
Geometric Mean allow for
answer
Geometric Mean to penalize inequality across the 3 dimensions
question
Equations to know
answer
1.Solow- Y=f(k,l) 2.Generalized Solow 3.Y=f(K)^alpha 3.5. Y=AK^alpha 4. Cobs Doggy Y= B0 +B1X1 +B2X2 etc 5.changeK =i-d i= gamma Y= I/L d= delta K= D/L Change K= gamma*Y- delta*K 6. Master equation change K= gammaAK^alpha-deltaK 7. d= (n+delta)K Accounting for population Remember you start Y=A*k^alpha*L^beta alpha +beta= 1
question
Criticisms of the HDI as a measure of development?
answer
2 Facets Hapiness- Tough to measure and these three goals may not totally encompass the solution. Education- While education is useful it is not always an indication of prosperity
question
What does it mean if a nation's HDI rank is above/below its GDP rank?
answer
HDI works 3 factors (Education, Health and Income) If. HDI>GDP- This means that the country has more growth in education and health than wealth HDI<GDP-This means that the country has more growth in wealth than education and health HDI=GDP- Not too sure Income growth= Health and Wealth Growth
question
History: WWII and the start of the UN in economic terms
answer
August 14th or 20th 1941 Altantic Charter Proposed January 24th- Casa blanc Itlay August 25th 1945 Liberation Paris Jan 26th 1945 51 Nations signed in San Fransisco Oct 24th 1945 The Un was established
question
Post War Information
answer
Marshall Plan- US gave 13 billion dollars of money for western Europe repairs Due to terms of Atlantic Charter 51 nations has swelled 121 countries Counsels- 6 5 (US) 1 (Switerzland) Birth rates surge after the war
question
Purpose of UN
answer
The economic growth and development of developing countries To promote international cooperation and order 2 Focuses Public gods- Non Rival/ Non Exclusive- water, roads (otherwise wont be set up) Through The United Nations Millennium Development Goal and The United Nations Sustainable Development Goals
question
United Nations Sustainable Development Goals
answer
Help poor countries 17 goals 1. No poverty 2. Zero Hunger 3. Health 4. Increase education 5. Promote Equality 6. Clean Water and Sanitation PHHEECw CeEIISR CaLbLaPP This the long terms they are working toward
question
United Nations Millennium Development Goal and
answer
UN- attempt to increase G+D Changing 1. Condition Official Development AID Ex- Tied aid- must spend aid money on country that provided it 2. Conditions of Debt 3. Conditions of of trade (idiotic one) Developed Subsidiary on agriculture Developing taxing on agriculture
question
Economic growth and the Solow Model
answer
Inputs (k,l) transformed output( G+S) Divide l out to get per capita growth Y=AK^alpha
question
Alpha and Beta Relationship to scales
answer
Alpha+ Beta=1 CRTS Alpha+ Beta>1 IRTS Alpha+ Beta=>1 DMR CRTS- for every increase input by X% then output increases =X% DMR-for every increase input by X% then output increases X%
question
Convergene theory
answer
"Catch Up theory"- Due to DMR on country growth and development it is easier for developing countries to catch up to developed countries. This due to numerous factors include the inital cost of R+D. It creates a slope that flatens out with less at the end
question
Does Solow support convergence
answer
Yeah DMR and the fact we need a technology shift!
question
Factor Accumulation Vs A change
answer
Factor Accumulation 1. Labor force increase 2. Investment Increase 3.Natural Resource Increase A change 1. This shift the whole curve out because of efficiency changes
question
What is the overarching goal of the study of growth and development?
answer
The over aching principal is sustainable growth and development of developing and developed countries and assist through policy implementation
question
How do economists approach this goal?
answer
Tools of Economist 1. Empirically analysis- Regressions 2. Principals- DMR, Comparative advantage, Increasing opportunity cost 3. Models Production Possibility Supply and Demand
question
• Why is sub-Saharan Africa doing so poorly?
answer
Lack of means K accumulation Lack of infrastructure High Investment, High Risk Corrupt Government instability Intergenerational Poverty Brain Drain- Smart leave K flight- Resource get sweeped
question
2 factor convulate National savings (gamma)
answer
Culture- Some cultures save alot or barely anything International Investment- Investment confuses this
question
What does it mean if saving is "endogenous"? What are the implications for economic growth?
answer
Endongenity is big problem when trying to quantify information. Y =X in a cyclical we can tell the impact of 1 unit of X on Y ( this known as the slope) This clouds it Since this happens it makes it harder to predict what happening. Rich Stay Rich - They plenty money to keep and invest Poor Stay Poor- SES they dont have money to invest or keep
question
A
answer
He defines A( education, health or production function)
question
Steady State K,Y
answer
This our equilibrium point This is where depreciation will bring back to and investment will drive forward to
question
K vs Kss
answer
K>Kss= Investment is greater than deprecation K<Kss= Depreciation is greater than investment K=Kss=nothing
question
Solow Country to Country Comparison
answer
If all is held and we have changeY1/changet> changeY2/changet y1=y2 gamma=gamma delta=delta A=A Alpha- given Gamma , delta or A one will not be given solve Yss find out which changing and by how much? Monkey wretch might be thrown in here ??
question
Solow Model Change in - i,d,A
answer
i increase= push to right (+K) d increases we push back (-K) A increase = shift graph More for your K) Does this entail shifts for all three because of solow model and math assoicated how to drive Yss and KSS deritatives???3
