...Glenda Stahl 03/13/16 Week Eight Homework What is economic growth and how do we use GDP to measure an economy? Economic growth is measured by the value of all the products manufactured and sold in a country over the course of one year along with everything people do and get paid for. There are four categories that create GDP: consumers, investments, governmental spending and other companies that buy from another country. GDP measures income, but not equality, it measures growth, but not destruction, and it ignores values like social cohesion and the environment. However, there are countries that are trying to include social cohesion and the environment because it does have an effect on economic growth. What cause or contribute to the growth of an economy? Economic growth is measured by real GDP growth where the ability of a country to increase the value if it’s production of goods and services after removing the effects of inflation. When people earn more money they buy more products which results in economic growth. Economic growth is important for a country because it leads to a better standard of living for all its citizens, even the poor. Countries with a good economy can offer better health care services, safer working conditions and spend more on insuring a cleaner environment. Also, economic growth allows countries to reinvest money into areas that will promote future growth such as education, technology, capital and infrastructure. What is the rule of 70?...
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...using percentage change in nominal GDP is an inadequate measure of economic growth” (20 marks) A normal GDP is defined as the GDP calculated using current market prices. This means that it does not take inflation into account. This is an inaccurate measure of the economic growth. The reason for this is that the sustained increases in prices over the years do not allow for the measurement to be realistic. For example, is a mars bar is not 60p now and was 40p fifteen years ago, then the 50% increase in price is going to contribute to the GDP. If compared to the nominal GDP 15years ago the current GDP will be much higher as OUTPUT+EXPEDITURE=INCOME. But this is not the true value as inflation has forced prices to go up and therefore be measured and calculated to give a much larger GDP. If one creates a scenario where the value of the 40p bar and the current 60p bar is the same then the GDP (if transferred to all the other objects) should be the same. Real GDP would take this inflation out of the equation and replace it with the base value of the product. This would in fat give a much more accurate measurement of the GDP at the current time. When referring to economic growth, GDP gives a large hint to where economic growth is. The use of nominal GDP is therefore going to give the wrong conclusion to the direction of economic growth and so it is not an adequate measurement of economic growth. Also the quality of products is not accounted for in the GDP. The improvements in technology...
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...How is public debt related to economic growth and unemployment? In this project different economic factors will be compared with each other to see if any correlations exist between them. These will perhaps explain certain trends and changes we see. The three factors focused on in this report are GDP growth, Government Debt and Budget surplus/deficit. In the data provided there is a very large standard deviation for GDP (see appendix). In both 2009 and 2010 the standard deviation was over four and a half times larger than the average of GDP itself. This will make it hard to create general assumptions for all countries to assess whether different factors correlate with each other. Even other factors such as GDP growth have relatively large standard deviations. This may cause difficulties in examining factors. An example of ambiguous data can be seen when comparing Canada and India. They both had fairly similar GDP and debt figures in 2010 but India’s GDP growth was around three times that of Canada’s. This shows that we cannot make hard-and-fast rules on links between different factors but we may be able to make general connections and assumptions. Distribution of GDP Growth and Government Debt within countries Figure 1: GDP Growth (2009-2010) 60 50 Number of Countries 40 30 20 10 0 Frequency GDP Growth 2009-2010 (% change) As we can see from Figure 1 distribution of GDP growth is relatively small, with 93.4% (171/183) countries having a growth between 0% and 10%. If we then...
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...S. Military Spending and its impact on the Economy’s GDP Matthew Magana Abstract This paper examines whether increases in military spending have a positive or negative impact on the U.S. Gross Domestic Product (GDP). The paper focuses on the three North American economies: Canada, Mexico and the United States as models to develop a case. It will also illustrate the utilization of multiple economic tools to produce variable outcomes to analyze the full spectrum of economics. It will also discuss the multiple statistical models such as Granger causality and Vector autoregression and the asymmetric results produced. Increased U.S. Military Spending and its impact on the Economy Given the long-accepted, theoretical direct relationship between investment and economic growth, if defense spending has a negative impact on investment, then it would seem reasonable that defense spending would have an adverse impact on economic growth. This was exactly the findings of two studies published in the seventies, zymanski (1973) and Lee (1973). Some studies attribute the negative effect of defense spending on economic growth to reduced investment. Another study argues that defense spending restricts export growth and economic growth because military expenditures compete for the same resources used in the production of exports. Which may also be a understood trade off for military spending vs. export and economic growth. However, other studies were unable to find any stable...
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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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...Inequality and Growth in a Panel of Countries* Robert J. Barro, Harvard University June 1999 Abstract Evidence from a broad panel of countries shows little overall relation between income inequality and rates of growth and investment. However, for growth, higher inequality tends to retard growth in poor countries and encourage growth in richer places. The Kuznets curve—whereby inequality first increases and later decreases during the process of economic development—emerges as a clear empirical regularity. However, this relation does not explain the bulk of variations in inequality across countries or over time. *This research has been supported by a grant from the National Science Foundation. An earlier version of this paper was presented at a conference at the American Enterprise Institute. I am grateful for excellent research assistance from Silvana Tenreyro and for comments from Paul Collier, Bill Easterly, Jong-Wha Lee, Mattias Lundberg, Francisco Rodriguez, Heng-fu Zou, and participants of a seminar at the World Bank. 2 A substantial literature analyzes the effects of income inequality on macroeconomic performance, as reflected in rates of economic growth and investment. Much of this analysis is empirical, using data on the performance of a broad group of countries. This paper contributes to this literature by using a framework for the determinants of economic growth that I have developed and used in previous studies. To motivate the extension of this...
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...MIXED ECONOMIC SYSTEM: INDONESIA Indonesian Economy Overview The largest economy in Southeast Asia, Indonesia – a diverse archipelago nation of more than 300 ethnic groups -- has charted impressive economic growth since overcoming the Asian financial crisis of the late 1990s. The country’s gross national income per capita has steadily risen, from $560 in the year 2000 to $3,630 in 2014. Today, Indonesia is the world’s fourth most populous nation, the world’s 10th largest economy in terms of purchasing power parity, and a member of the G-20. It has made enormous gains in poverty reduction, cutting the poverty rate to more than half since 1999, to 11.2% in 2015. Indonesia’s economic planning follows a 20-year development plan, spanning from 2005 to 2025. It is segmented into 5-year medium-term plans, called the RPJMN, each with different development priorities. The current medium-term development plan – the third phase of the long-term plan -- runs from 2015 to 2020, focusing, among others, on infrastructure development and improving social assistance programs in education and healthcare. Such shifts in public spending has been enabled by a reform of long-standing energy subsidies, allowing for more investments in programs that directly impact the poor and near-poor, as well as vast improvements in infrastructure investment. Considerable challenges remain in achieving Indonesia’s goals. Due to weaker demand for commodities – the fuel for Indonesia’s economic boom in the...
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...analysis of the data - GDP growth: recessions and cycles. GDP Growth: Recessions and Cycles Figure 1 - US Real GDP 1930 – 2014 with 2009 as the Base Year Source: (Shiller, 2015); (Federal Reserve Bank of St. Louis, 2015) Figure 1 above shows the real Gross Domestic product (GDP) of the United States for the years 1930 to 2014. Real GDP is essential and important as it shows the general soundness of the economy. Thus, when real GDP is high it means other macroeconomic factors such as employment and economic growth are positive and vice versa. This is because real GDP is substantially correlated to these macroeconomic factors. Therefore, the chart above shows that America’s GDP has been growing steadily over the years. This consistent growth has seen to it that America’s real GDP hit a high of 16.16 trillion U.S. dollars up from a low of around 1.06 trillion U.S. dollars in 1930. It is also apparent that the steady growth in the real GDP has led to many significant improvements in the economy and standards of living. Thus, it is evident that the standards of living and other macroeconomic factors are better now than in the mid nineteen hundreds (OpenStax College, 2014). Further, statistical and economic analysis shows that the real GDP of America has an average median and mean of approximately 6.34 and 7.20 trillion dollars respectively (Shiller, 2015). This is caused by the various cyclical changes in the economy. Despite the steady growth in real GDP the U.S. economy has...
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...References: 11 Introduction: GDP is the total market value of all final goods and services produced in a country in a given year.GDP can be stated in two forms: Current price and constant price. Nominal GDP or GDP at current measures the value of output of a given by using the prices of that particular year. Where Real GDP or GDP at constant price shows the value of all output of a given year expressed in base year prices (according to Bangladesh economic review 2010 the base year is consider to be 1995-96). GDP is a key indicator of macroeconomic and increased in GDP is consider to very desirable because it generates higher income and lower unemployment and Government borrowing. Though global economy experienced an unparallel financial crisis, the Bangladesh Bureau of Statistics (BBS) estimated GDP growth of 5.83% for the financial year 2009-10. MTMF consider a growth of 6 percentage due to positive trend in export earning, a rose in production of aman and boro, increase in agriculture and industrial credit and finally the growth of imports of capital machinery and industrial raw materials. We will examine how increase in broad agriculture and service sector and increase in sub sectors of industrial sector lead to a positive growth in GDP at current market price. (According to BER GDP at market price is estimated TK 47405 which is 11.21% higher than GDP per capita of FY 2008-09). Moreover with a table of average change in the GDP (both current and constant), change in...
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...China’s Economic Growth 1978-2025: What We Know Today about China’s Economic Growth Tomorrow Views of the future China vary widely. While some believe that the collapse of China is inevitable, others see the emergence of a new superpower that increasingly poses a threat to the U.S. This paper examines the economic growth prospects of China over the next two decades. Extrapolating past real GDP growth rates into the future, the size of the Chinese economy surpasses that of the U.S. in purchasing power terms between 2012 and 2015; by 2025, China is likely to be the world's largest economic power by almost any measure. The extrapolations are supported by two types of considerations. First, China’s growth patterns of the past 25 years since the beginning of economic reforms match well those identified by standard economic development and trade theories (structural change, catching up, and factor price equalization). Second, decomposing China’s GDP growth into growth of labor and other variables, the near-certain information available today about the quantity and quality of Chinese laborers through 2015, if not several years after, allows inferences about future GDP growth. Short of some cataclysmic event, demographics alone suggests China’s continued economic rise. If talent is randomly distributed in the world population and if agglomeration of talent is important, then the odds are strongly in China’s favor. Introduction The rapid economic growth of China since the...
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...Long Run Prospects for GDP Growth in India Ombir Singh Ombir Singh, School of Management, Gautam Buddha University, Greater Noida Gautam Budh Nagar, U.P. PIN-201308, India Tel: -91-120-2344324 E-mail: odahiya@gmail.com Manju Dahiya Manju Dahiya, Research Associate, Institute of Development Studies, M.D. University Rohtak (124001), Haryana, India E-mail: manju11jan@gmail.com Abstract Due to global financial crisis, issues relating to the growth of Indian economy have been the subject matter of debate and discussion at home as well as abroad. Global financial crisis affeced the growth rate of every sector of the economy but not as much as high, slogans annonced by the corporate sector. The Indian economy has been achieving the high rate of growth after the reform process. In India, where rapid economic growth has become a national goal, analysis of the sources of growth assumes special significance to formulation of the macroeconomic strategy and policies that affect the future growth rate- as well as pattern. This study explains “How has the Indian economy growing after independence. Using the latest data on labour and a model of capital accumulation and productivity growth, we map out GDP growth on India economy until 2050. It estimates potential growth using the Cobb-Douglus production function in the Indian context and then examine their implication for policy. 1. Introduction During the last couple of years, issues relating to the growth of Indian economy have been the...
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...GDP Research Paper Kechen Sun Econ-201 Spring 2016 Gross Domestic Product, also known as GDP, is defined as the dollar value of all final goods and service produced within the border of a country during a specific period of time, typically in one year. GDP measures the value for the whole country, and it also changes quickly. We can take a look at the trends of US GDP in the website of the U.S. Bureau of Economic Analysis. In the time period shown in the BEA release highlights document (2015, bea.gov), it is clear that real GDP increased 2.0 percent in the third quarter of 2015, according to the third estimate by the BEA. The document also states that the main driver of the increasing GDP is the rise in consumer spending on nondurable and durable goods, also on service especially health care (2015, bea.gov). There are also other factors contributed to the increase of GDP, such as Business investment, state and local government spending, residential investment, and exports. Another highlight of GDP in 2015 is the 1.6 percent decrease of corporate profit in third quarter after the 3.5 percent increase in the second quarter. In the third quarter, while profits of domestic nonfinancial corporation and the profits from the rest of the world decrease, profits of domestic financial corporations increased (2015, bea.gov). The time period that shows the most significant amount of growth of GDP in the document was from 2013 to 2014. In the document, it shows in the second...
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...regional economic growth of China 1. Introduction Economic growth is always an important topic in the economics research. Many study in the past just considered region as an isolated “island”, and the mutual relations among different regions were usually ignored. However, regional economy is an open system. Factors such as trade, factor mobility (labor or capital), and technology or knowledge spillover will all make relations among regions become complicated. Under such circumstance, regional economy is no longer isolated but strongly related. The development of regional economy not only relies on its own endowment, also highly depends on the development of other regions This paper is going to bring relative spatial autocorrelation analysis and econometrics methods in the analysis of regional economic growth in China. It attempts to test the spatial dependence of economic growth among different provinces in China and its tendency. The inner mechanism of regional economic growth will also be discussed. In the second section, I will briefly introduce the literature review about regional economic study in China. In the third section, using a sample of per capita GDP data over 1978-2008 in 31 provinces in mainland China, I compute a global spatial autocorrelation, and use the local spatial autocorrelation to get general idea where this global spatial autocorrelation come from. In the fourth part, the spatial factors which influence regional economic growth will be tested...
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...OUTLINE I. A brief description of this country in terms of demographics, language, currency, political system, predominant industries, and current (i.e. last year) economic indicators such as nominal GDP, GDP per capita, unemployment, budget deficit (% of GDP), balance of payments accounts (% of GDP), and inflation. II. Brief description of the behavior of various economic indicators at the last 20 years III. Brief description of the behavior of various economic indicators for at the last 20 years IV. The relationship between the accounts in the balance of payments, average interest rate, and the government budget balance. Is there any relationship among these variables that the economic theory tells us? 1. A brief description of this country in terms of demographics, language, currency, political system, predominant industries, and current (i.e. last year) economic indicators such as nominal GDP, GDP per capita, unemployment, budget deficit (% of GDP), balance of payments accounts (% of GDP), and inflation. The country has recorded a population of 62.3 million in 2010 up from 52.4 million in 1960. The analysis shows an increase in population growth by about 18% over the last five decades. The world statistics indicates that the UK’s population accounts for 0.9% of the total world’s population. The results show that in every 112 persons living on the planet earth, one of them is a resident of the UK (The trading economics.com n.p). Politics and employment ...
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...SYNOPSIS/PROPOSAL Relation between the stock market and GDP Submitted by: Abstract: This research will analyze the stock market earnings impact on the GDP growth of a developing country i.e. Pakistan. This study will help to establish a relationship between stock market earnings and economic (GDP) growth of the country, basically it will answer this question, “How the stock market earnings affect the GDP?” In this research, I shall apply the co integration and error correction model to the stock market performance and GDP and shall try to segregate the role of primary from secondary market and find out linkages between secondary market and growth that may impact on GDP of Pakistan. I shall make an effort to find indicators that lead to growth by having stock market earnings at the back. Table of Contents with List of Tables and/or Illustrations Serial number|Description|Page numbers| 1|Title|i| 2|Abstract|ii| 3|Table of contents|1| 4|Introduction|2| 5|Research Question|3| 6|Research Objective|3| 7|Literature Review|4| 8|Significance|5| 9|Research Methodology|6| 10|Data Collection Sources|6| 11|Data Collection Tools|6| 12|Hypothesis|6| 13|Research Model|7| 14|Theoretical Framework|7| 15|Type of research|8| 16|Sampling technique|8| 17|Data processing, analysis and statistical tools|8| 18|Reference|9| Theoretical framework Illustration…………………………………….7 Introduction: GDP is the key indicator of the economic growth of a developing country. This study will find...
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