...openness and the faster long-term growth in standard of living | (Makin, A.J., 2002, p.10) | | | | Sanjeev Henny s2760582 Yu-Ting, Lin s2672341 Yen-Ting, Lee s2768300 World count: 985 | With the increasing globalization of most economies, there is consequently more focus on understanding how international integrations influence macroeconomic performance. Economists use numerous indicators to measure the degree of an economy’s openness. One of the common indicators is the percentage of trade as a share of gross domestic product (GDP). It is the sum of exports and imports of goods and services measured as a share of GDP. (World Bank, 2013). This essay will firstly generally examine the degree of openness for various countries by using the percentage of trade as a share of GDP. It will then outline Singapore as the most open country, Brazil as the least open country and the most rapidly increased openness: Hong Kong. Finally, it will examine whether the degree of openness is correlated with faster long term growth in standard of living. In advanced economies, there are many kinds of methods to analyse an economy’s openness. There has been one commonly used indicator which is the percentage value of the sum of exports plus imports as a share of national product. (Makin, 2009, p.8). Therefore, the feature in the data that we have complied is using the value of the sum of exports and imports divided by GDP times hundred. With this resource we...
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...improve people standard of living in order to achieve economic growth while at the same time controlling inflation and unemployment (Gans, King, Stonecash and Mankiw, 2009, p. 11). However, the aim of discussion is to analyses how “a country’s standard of living depends on its ability to produce goods and services”. Review Lessons (principles) 8 Gans, et al (2009, p. 11) stipulated that “a country’s standard of living may be measured by comparing personal incomes or by comparing the total market value of a nation’s production”. People living in high-income countries may have a better standard of living than people living in low-income countries because they can afford cars, houses, clothes, furniture, appliances, foods, education and more (Chari & Kehoe, 2006, p. 3). Hobijn and Steindel (2009, p. 2) suggested that the living standard can be determined by looking at the country GDP which stands for “gross domestic product”. Nevertheless, the focus of this discussion is on the real GDP because it measures the production of goods and services at constant prices as it is a pretty good indicator of individual material standard (Hobijn & Steindel, 2009, p. 2). Appendices A and B highlights countries with the highest and lowest GDP per capita in the world. GDP per capita gives the average amount of income that each member of the population potentially has access to. Hence, the more money each individual can access to, the higher the potential standard of living. For instance...
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...world’s largest producer of raw material such as tin and rubber to being a diversified economy to reduce the dependence of exported goods. As a result, Malaysia GDP is now driven mainly by the services and manufacturing sectors (Malaysia Factbook 2014). 2.0 Malaysia Economic Growth Rate Table of Malaysia GDP Growth (Annual %) from year 2003-2012 Year | GDP Growth (Annual %) | 2003 | 6 | 2004 | 7 | 2005 | 5 | 2006 | 6 | 2007 | 6 | 2008 | 5 | 2009 | -2 | 2010 | 7 | 2011 | 5 | 2012 | 6 | Sources: The World Bank Group 2014a Line chart of Malaysia GDP Growth (Annual %) from year 2003-2012 Sources: The World Bank Group 2014a The x-axis of the line chart above represents years from 2003 to 2012 while y-axis represents Malaysia’s GDP Annual Growth Rate. GDP Growth (Annual %) can be defined as annual percentage growth rate of GDP at market prices based on constant local currency (Index Mundi 2014a). According to the line chart, GDP Annual Growth Rate in Malaysia is at average of 5.1 percent from year 2003 to year 2012 and it was growing above 5 percent with the exception of year 2009. The Annual Growth Rate hit record lows of -2 percent in year 2009 and reached an all time high of 7 percent in year 2004 and 2010 (The World Bank Group 2014a). One of the reasons that contribute to the growth of GDP in year 2004 is the growth of private investment, implying...
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...------------------------------------------------- Do you think that Higher GDP shows higher standard of living? Explain your answer with logical justifications. Higher GDP does not show a higher standing standard. GDP does not measure happiness, or well-being, or what economists call utility. As a gross measure, it aggregates data for a geographic area, ignoring important distributional questions and individual preferences. It does not account for the value of a nation’s stock of assets and liabilities. GDP is not a good measure for the well-being of a nation because more populated countries generally have a higher GDP whereas the people as a whole may not be enjoying a high living standard. Some reasons how this is justified can be: 1. Free time or leisure is not included in GDP analysis. While someone may be happier only working three days a week, that additional day off will reduce the GDP value. It is possible for very industrious country have a very high GDP, but its entire people could be overworked and sick which would turn to a poor wellbeing number. 2. GDP measures total production for a nation, and GDP per capita gives an average amount of output per person. However it does not tell how GDP is divided among its residents. 3. Some services and products included in the GDP measure actually lower our well-being. When expenditures on services are made it doesn’t necessarily mean that they improve country’s wellbeing. 4. GDP focus on goods and services sold in the market...
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...average income. Standards of living can be defined as the level of wealth, comfort, material goods and necessities available to a certain socioeconomic class in a certain geographic area. When discussing the idea of standard of living, it is important to recognise that income per head is not the only indicator, and there are several others such as the human development index (HDI) and the misery index (MI). National income data ignores economic welfare brought about by ‘informal’ economic activity – ie economic activity that’s not recorded by government statistics (which is a large chunk of some developing countries), therefore looking at just the income per capita may give a narrow-minded view. The idea of a non-representative income per head through inequality can be displayed on the Lorenz Curve below. The green line in this diagram shows the Lorenz curve for Netherlands and Ireland. This shows that there is great inequality amongst the population, as the bent curve means a greater share of the country’s overall income goes to a relatively small number of people, hence showing that just the GNI/head does not give a good indication as the average will be significantly higher than what some people’s actual incomes are. An advantage however of using income per head as an indicator of standard of living is the idea of PPP (purchasing power parity). If income per head is higher in Netherlands and Ireland, then they are more likely to have a higher standard of living. This means...
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...14/01/2016 PART 1 Introduction Macroeconomics: Branch of economics that studies the economy as a whole, especially the overall levels of production, employment, consumption, investment and prices. Microeconomics: Branch of economics that studies the individual behavior of firms and consumers and how they interact on a particular market. Macroeconomics focuses on the following issues: - Where does economic growth come from? - Could economic growth continue indefinitely, or is there some limit to growth? - Is there anything that governments can do to alter economic growth? - What are the origins of business cycles? - Should governments act to smooth business cycles ? - What does cause high rates of inflation? - How does the central bank affect prices and interest rates? - What are the root causes of a high unemployment rate? - Should countries adopt fixed or flexible exchange rates against the U.S. dollar? To answer previous questions, Macroeconomists use theories and models. - In economics, as in other sciences, explanations and predictions are based on theories and models. - A theory is a set of rules and assumptions used to explain observed phenomena. - A model is a simplified representation of the reality based on theories. - In economics, a model usually consists of a system of equations. 1 14/01/2016 - The relationship between facts, theories, model, and predictions: Predictions Model Theories Data “If I could...
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...population is expected to decline, while the fraction of the population that is retired is expected to increase sharply. What are the implications of these population changes for total output and average living standards in Japan, assuming that average labour productivity continues to grow? What if average labour productivity stagnates? Solution 1: Slowing population growth and an increased share of retired people both imply slower growth in the number of people employed. If average labour productivity (output per employed worker) continues to grow at earlier rates, total output will still grow more slowly than before, because of slower growth in the number of workers. If average labour productivity stagnates, then total output will grow very slowly or even decline. Living standards depend not on total output but on output divided by the total population. Slowing population growth reduces total output but also the number of people who share that output. So slower population growth in itself should not affect living standards. However, a reduced share of the population that is working, all else equal, will reduce output per person, lowering living standards. Slower productivity growth will only worsen this problem. 2. Is it possible for average living standards to rise during a period in which average labour productivity is falling? Discuss, using a numerical example for illustration. Solution 2: It’s possible, if the decline in average labour productivity (output...
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...INTRODUCTORY MACROECONOMICS BDEK 2203 Name : Amielia Bte Mohd Hanif No. matrix : 840615055270001 Question 1 (a) Cost of living- Price of goods and services required for maintaining an average level standard of living. Cost of living varies from place to place, and from time to time. Standard of living-The financial health of a population, as measured by the quantity of consumption by the members of that population. The measure most frequently used to estimate standard of living is gross national income per capita. One drawback to the standard of living measurement it does not take into account some factors which are important but hard to quantify, such as crime rate or environmental impact. (b) Objectives of macroeconomic policy is to maintain the full employment; increase the growth of national output in term of GDP; keep control the inflation in the acceptable level; induce the Regional Balance of the uneven distribution area and the balance of Trade which is the least objective because it's the government constraint rather than an objective on decision making. (c) The pillars of productivity growth in an economy: * The rate at which the economy builds up its stock of capital. * The rate at which technology improves. * The rate at which workforce quality or human capital is improving. Question 2 Item Amount /Jumlah (Billions of Ringgit/Bilion Ringgit) | ...
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...Assignment On Relationship between GDP & HDI Submitted ToCourse Instructor Of B-University of DhakaDepartment of Banking | Submitted ByMd. Yasir ArafatId No. 62B.B.A 13th BatchDepartment of BankingUniversity of Dhaka | Date of Submission08.o7.09 | Introduction to GDP A region's gross domestic product, or GDP, is one of the ways of measuring the size of its economy. The GDP of a country is defined as the total market value of all final goods and services produced within a country in a given period of time (usually a calendar year). It is also considered the sum of value added at every stage of production (the intermediate stages) of all final goods and services produced within a country in a given period of time. Components of GDP Each of the variables C (Consumption), I (Investment), G (Government spending) and X − M (Net Exports) (where GDP = C + I + G + (X − M) as above) C (Consumption) is private consumption in the economy. This includes most personal expenditures of households such as food, rent, medical expenses and so on but does not include new housing. I (Investment) is defined as investments by business or households in capital. Examples of investment by a business include construction of a new mine, purchase of software, or purchase of machinery and equipment for a factory. Spending by households (not government) on new houses is also included in Investment. In contrast to its colloquial meaning, 'Investment' in GDP does not mean purchases of financial...
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...forecasts of GDP. What exactly is GDP? How do we use GDP to tell us whether our economy is in a recession or how rapidly our economy is expanding? How do we take the effects of inflation out of GDP to reveal the growth rate of our economic well-being? And how to we compare economic well-being across countries? © 2010 Pearson Education Canada Gross Domestic Product GDP Defined GDP or gross domestic product is the market value of all final goods and services produced in a country in a given time period. This definition has four parts: Market value Final goods and services Produced within a country In a given time period © 2010 Pearson Education Canada Gross Domestic Product Market Value GDP is a market value—goods and services are valued at their market prices. To add apples and oranges, computers and popcorn, we add the market values so we have a total value of output in dollars. © 2010 Pearson Education Canada Gross Domestic Product Final Goods and Services GDP is the value of the final goods and services produced. A final good (or service) is an item bought by its final user during a specified time period. A final good contrasts with an intermediate good, which is an item that is produced by one firm, bought by another firm, and used as a component of a final good or service. Excluding intermediate goods and services avoids double counting. © 2010 Pearson Education Canada Gross Domestic Product Produced Within a Country GDP measures...
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... | |Learning Outcomes |Tasks/Means |Criteria & Allocated Marks |Assessed | | | | |Marks | | | |STRUCTURE (10%) | |Successful students are able to: |Conduct a secondary research and write a report on | | | |Malaysia Economic Growth (increase or decrease in GDP). | | |Describe in detail the recent | | | |economic conditions...
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...between GDP and Quality of life Subject name: Macroeconomics Teacher’s name: Dr. Nguyen Trong Hoai Student’s names: 1) Ho Tran Thuy Nguyen 2) Nguyen Le Hoang Phuong 3) Phan Hoang Anh Thu 4) Huynh Thi Thu Ha 5) Le Phuoc Thanh Tin 6) Loi Kim Chau 7) Han Khanh Phương 8) Le Hoang Vu 9) Vu Quang Huy Date due: 15/05/2011 Table of Contents I/ Introduction: 3 II/ GDP- a powerful tool for economics measurement: 4 III/ Why is GDP not a perfect measure of well-being? 7 1. Leisure time: 7 2. The environment: 8 3. Non-market activity: 10 IV/ Conclusion: 11 I/ Introduction: It is no doubt that if people want to judge a person is doing economically, they usually first look at his or her income. Similarly, when talking about an economic condition of a country, it is not surprise that people most frequently look at the average income of that nation or in other word, Gross Domestic Product (GDP) per capita. To be more specific, the most commonly accepted method of comparing generalized differences in quality of life on a whole between nations is to use GDP per capita on purchasing power parity (PPP) basis in current international dollars. In our report, we propose to clarify the usefulness (the reason why economists use GDP per capita as a major measurement) as well as the limitation when using GDP to measure the economic well-beings of a nation. Before looking at pros and cons of GDP, it is necessary to know how GDP and...
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...Q. How is GDP measured and what are its limitations as a measure of the quality of life? A. Gross Domestic Product (GDP) can be defined as the annual value of output produced by factors of production within a nation’s border. In other words, it is the sum of all incomes earned by the country’s residents when producing goods and services with resources located inside that country. GDP is not to be confused with Gross National Product (GNP), which measures the flow of output produced with resources, which are owned by the nation wherever they might be located. The difference between GDP and GNP is net property income from abroad. The word “gross” in both of these measures of national income, indicates that no account has been taken of depreciation. There are 3 methods of calculating GDP: the product/output method, the income method and the expenditure method. In theory, because they all claim to measure the same aggregate, they should all give the same total. This is shown below in the circular flow of income: However, in practice, this is unlikely to be the case. This is because extremely large sums arising out of millions of transactions paid over different time periods are being dealt with and it would therefore be very unlikely if all 3 measures coincided. The first way of measuring GDP is to add up annually all the value of the goods and services produced in the country, industry by industry. This is known as the output or product...
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...Economic Growth Question 1 GDP in 2010 €2500bn % Change in 2011 0.7% €2,500bn x 0.7 = €17.5bn China has consistently the highest growth rates in GDP year on year and of the counties listed appears to be the main driver of growth as the other economies pattern of growth remains flat. For example the estimated growth in 2013 for China is 8.3% whereas the other economies are predicted to grow between 0.3% and 2%. Question 2 Fiscal drag is a concept where inflation and earnings growth may push more taxpayers into higher tax brackets. Therefore fiscal drag has the effect of raising government tax revenue without explicitly raising tax rates. In 2014, fiscal drag has pulled more and more taxpayers into the threshold at which people start paying the 40% tax rate of income tax. Just 1.4m people paid it when Lord Lawson established the 40p rate in 1988. This year 4.4m will do so. Question 3 Some view GDP as an inaccurate measurement for economic development. There are many limitations; GDP measures the quantity of goods produced in an economy without taking into consideration the effect those goods have on the economy. Higher quality goods/ new products replace the older products in the market, for example medical equipment improves constantly with technological advancements, however, GDP does not take into account how these changes have a positive impact on peoples lives, therefore increasing their quality of life; a factor of GDP. Another limitation is not...
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...of aggregate supply and aggregate demand, economic can be both desirable and undesirable. Firstly, economic growth at its most basic level increases GDP and employment. If consumers are spending more money, whether it is by increased consumer confidence, lower interest rates or rise in house prices, companies usually see increased profits. As a result, they are more likely to invest in their business and expand its capacities. This, not only adds to economic growth, but also creates employment and further adds to GDP. This shifts the aggregate demand curve (AD) from AD1 to AD2 as per the diagram. This doesn’t affect inflation as prices stay the same, yet GDP and employment increase. For example, in the early 90s in the UK, employment was at 25 million, whereas 13 years later it was at 29 million, with low unemployment figures. Quality of life also increases with economic growth. When the employed are earning more money and see their wages rise, they have more expendable income. These people no longer are spending to live, but are living to spend. Luxury goods and services are consumed, house prices rise, and government services also improve. These all improve the quality of life for consumers and the employed alike. It also increases the number of people who are living in poverty. For example in 1990 34% of people were living on under $1 a day, whereas in 2002 it was 22%. This was largely due to the 8% economic growth figures that many Asian countries felt in the latter half...
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