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Measuring Growth and Development

Econ 112 Economic Development Dr. Haight Fall 2014

Housekeeping Readings

Text Chp 2 Two supplemental readings on the MDGs

Tasks Start forming your video project groups

4-5 people Proposal due Sep 17

Choose your first book and start reading Provocative Lecture

Dr. David Skarbek 5:15-6:45pm Student Union Theatre Sep 8 Why do Prison Gangs Exist?

Measuring Economic Growth

Gross National Product (GNP) value of all finished goods and services produced by a society during a given year (includes that produced by citizens outside the country)

Gross Domestic Product (GDP) value of all finished goods and services produced within a country durng a given year

Per capita income GDP or GNP divided by the population

Real numbers are adjusted for inflation

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Measuring GDP What doesnt GDP capture?

Lots of informal or extralegal income Income distribution Price differences Currency issues Value of leisure Environmental Factors

Is GDP the same thing as productivity?

Productivity is the effectiveness with which factors of production are converted into output.

Problems with GDP measurements

Activities that are not included mean GDP is understated

As countries grow, and more is accounted for, GDP growth can be overstated

Measurement and tracking in developing world can be unreliable

GDP doesnt account for things like pollution, depletion of natural resources, crime levels, congestion. Should it?

Exchange Rate Conversion To compare different countries GDP/GNP, must

convert to the same currency.

Problems: Exchange rates can be distorted Non-tradable goods (haircuts)

Exchange rates determined in part by trade

Solution: Purchasing Power Parity

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Calculating PPP

Economic Growth A new economic topic!

The History of Economic Growth

Doesnt really exist From 0AD to 1000AD, essentially no growth at all For next 800 years.and increase of only 50%

For comparison, Chinas GDP per capita increased 50% over a 5 year period!

Economic Growth began for some countries in approximately 1820. Why? What happened to change things?

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GDP by region over time

Housekeeping Readings

Text Chp 2 Two supplemental readings on the MDGs

Tasks Start forming your video project groups

4-5 people Proposal due Sep 17

Choose your first book and start reading Provocative Lecture

Dr. David Skarbek 5:15-6:45pm Student Union Theatre Sep 8 Why do Prison Gangs Exist?