Report to Econ Issue

7/28/2019 Report to Econ Issue

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Chapter 1

Alleviating Human Misery: TheRole of Economic Reasoning


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Goods & Services

Food, Clothing, Shelter, Transportation

Health Care, Education

Truth, Justice, and the Filipino Way

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Resources

Labor

Capital

Technology

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Scarcity

Scarcity

Economic Problem

Our Insatiable

Wants

Our Limited

Means

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The Capacity of the Economy toProduce

Gross Domestic Product

total market value of all final goods and

services produced within an economy during

a specific time period

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Production Possibilities

Food Education

0 100

40 8650 80

60 72

90 40

100 0

20

20

40

40

50

60

90

80 86 100 Education (millions of student years)

Food (millions of tons)

72

A

D

C

C

E

F

Z

100

B

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General and Specific EconomicGrowth

100

100

Education (millions of student years)


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The Opportunity Cost Principle

There is no such thing as a

free lunch

Increasing opportunity cost

The Optimal Combination ofGoods and Services

Marginal Social Cost(MSC)

Marginal Social Benefit

(MSB)

Cost-Benefit Analysis

20

20

40

40

50

60

90

72 80 86 100

100

Education (millions of student years)


A

B

D

C

C

E

F

Z

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Adjusting GDP for Inflation

Year Production

of Bread

(Loaves)

Price of

Bread

GDP in

Current

Dollars(1)x(2)

Price Index

Percentage and

Decimal Forms

Real GDP

(2009 Dollars)

(3)/(4)

2009 1,000 $1.00 $1,000 ($1/$1) x 100= 100, or 1.00

$1,000

2010 1,000 2.00 2,000 ($2/$1) x 100= 200, or 2.00

$1,000

Two good example

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Copyright 2010 by the McGraw-Hill Companies, Inc. All rights reserved.

AdjustingGDPfor

Population

YearGDP, Current Dollars

(Billions)Price

Index

GDP, Real

2000 dollars

(Billions)Population

(Millions)

GDP, Real

per Capita

(2000

Dollars)

1980 2,789.5 54.043 5161.6 227.7 22665.97

1981 3,128.4 59.119 5291.7 230.0 23010.79

1982 3,255.0 62.726 5189.2 232.2 22349.28

1983 3,536.7 65.207 5423.8 234.3 23148.28

1984 3,933.2 67.655 5813.6 236.3 24597.68

1985 4,220.3 69.713 6053.8 238.5 25386.51

1986 4,462.8 71.250 6263.6 240.7 26027.65

1987 4,739.5 73.196 6475.1 242.8 26667.93

1988 5,103.8 75.694 6742.7 245.0 27518.76

1989 5,484.4 78.556 6981.5 247.3 28226.17

1990 5,803.1 81.590 7112.5 250.1 28435.04

1991 5,995.9 84.444 7100.4 253.5 28010.42

1992 6,337.7 86.385 7336.6 256.9 28558.76

1993 6,657.4 88.381 7532.6 260.3 28943.21

1994 7,072.2 90.259 7835.5 263.4 29743.28

1995 7,397.7 92.106 8031.7 266.6 30131.36

1996 7,816.9 93.852 8329.0 269.7 30886.11

1997 8,304.3 95.414 8703.4 272.9 31891.01

1998 8,747.0 96.472 9066.9 276.1 32837.33

1999 9,268.4 97.868 9470.3 279.3 33907.90

2000 9,817.0 100.000 9817.0 282.4 34762.38

2001 10,128.0 102.399 9890.7 285.3 34663.54

2002 10,469.6 104.187 10048.9 288.2 34865.71

2003 10,960.8 106.404 10301.1 291.1 35388.20

2004 11,685.4 109.46 10,675.8 293.9 36,299.89

2005 12,421.9 113.34 10,959.9 296.6 36,913.10

2006 13,178.4 116.67 11,298.4 299.8 37,674.45

2007 13,807.5 119.82 11,523.5 301.6 38,207.89

2008 14,264.6 122.46 11,648.4 304.5 38,224.19

Recession

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CountryPopulation Estimate

2006 (Millions)Annual Rate of

Population IncreasePopulation Density per

Square Kilometer (2006)

Per CapitaReal GDP

(2006)Percentage Annual GrowthRate of Real GDP (2006)

Life Expectancy at Birth,Latest Available Dates

Lesser-developed

Chile 16 0.8 22 5,912 4.3 78

China 1,311 0.6 140 1,610 11.6 71

Columbia 46 1.4 45 2,317 6.8 73

Egypt 74 1.8 75 1,615 6.8 71

El Salvador 7 1.4 326 2,262 4.2 72

Ethiopia 77 2.6 77 161 10.9 52

India 1,109 1.4 373 637 9.7 64

Indonesia 223 1.1 123 983 5.5 68

Kenya 37 2.6 64 439 6.1 53

Mexico 104 1.1 54 6,389 4.8 74

Nigeria 144 2.4 159 454 6.2 47

Peru 28 1.1 22 2,552 7.6 71

Philippines 86 2.0 289 1,154 5.4 71

South Africa 47 1.0 39 3,562 5.0 51

Thailand 63 0.2 124 2,605 5.1 70

Venezuela 27 1.7 31 5,426 10.3 74

Zambia 12 1.9 16 321 6.2 42

Average 1.5 6.6 65

Developed

Canada 32 1.0 3.6 25,894 2.8 80

France 61 0.8 111 23,992 2.0 81

Germany 82 -0.1 236 24,474 2.8 79

Italy 59 0.6 200 19,630 1.9 81

Japan 128 0.6 350 38,824 2.2 82

Singapore 4 3.1 6,388 28,833 9.4 80

Sweden 9 0.6 22 31,189 4.2 81

Switzerland 7 0.6 187 35,794 3.2 82

United Kingdom 61 0.6 250 27,611 2.8 79

United States 299 1.0 33 37,674 2.9 78

Average 0.08 3.4 80

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AdjustingGDP for

Distribution

Country (Year ofStudy)

Poorest 20Percent

Second 20Percent

Third 20Percent

Fourth 20Percent

Richest 20Percent

Lesser-developed

Chile (2003) 3.8% 7.3% 11.1% 17.8% 60.0%

China (2004) 4.2 8.5 13.7 21.7 51.9

Columbia (2004) 2.9 6.9 11.0 18.3 60.9

Egypt (2004) 8.9 12..7 16.0 20.8 41.5

El Salvador (2002) 2.7 7.5 12.8 21.2 55.9

Ethiopia (2000) 9.1 13.2 16.8 21.5 39.4

India (2004) 8.1 11.3 14.9 20.4 45.3

Indonesia (2005) 7.1 10.7 14.1 20.5 42.5

Kenya (1997) 6.0 9.8 14.3 20.8 49.1

Mexico (2004) 4.3 8.3 12.6 19.7 55.3

Nigeria (2003) 5.0 9.6 14.5 21.7 49.2

Peru (2002) 3.7 7.7 12.2 19.7 56.7

Philippines (2003) 5.4 9.1 13.6 21.3 50.6

South Africa (2000) 3.5 6.3 10.0 18.0 62.2

Thailand (2002) 6.3 9.7 14.0 20.8 49.0

Zambia (2004) 3.6 7.9 12.6 20.8 55.1

Average 5.3 9.2 13.4 20.3 51.8

Developed

Canada (2000) 7.2 12.7 17.2 23 39.9

France (1995) 7.2 12.6 17.2 22.8 40.2

Germany (2000) 8.5 13.7 17.9 23 36.8

Italy (2000) 6.5 12 16.7 22.8 42.0

Japan (1993) 10.6 14.2 17.6 22 35.7

Singapore (1998) 5.0 9.4 14.6 22.0 49.0

Sweden (2000) 9.2 14 17.6 22.7 36.6

Switzerland (2000) 7.6 12.2 16.3 22.6 41.3

United Kingdom(1999) 6.1 11.4 16.0 22.5 44.0

United States (2000) 5.4 10.7 15.7 22.4 45.8

Average 7.3 12.3 16.7 22.5 41.1

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Adjusting GDP for Distribution

AnnualIncome

FamilyA

AnnualIncome

FamilyB

AnnualIncome

FamilyC

AnnualIncome

FamilyD

AnnualIncome

FamilyE

AnnualIncome

of allFamilies

AverageAnnual

FamilyIncome

Alpha $2,000 $2,000 $2,000 $2,000 $2,000 $10,000 $2,000

Omega 0 0 0 0 10,000 10,000 2,000

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Causes of Poverty and

Requisites of Economic Growth Quality of the Labor Force

Stock of Capital and Capital

Accumulation

Technology

Efficiency

Population

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Can Governments Help? Governments of LDCs

Private property rights

Universal education

Capital accumulation process

Social infrastructure

Population control

Governments of DCs Loans and grants Technical assistance

World Bank

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Computing Current-dollar GDP

Year

Bread Fruit Punch Current-

dollarGDP

Pb Qb PbQb Pf Qf PfQf

2009 $1.00 100 $100 $2.00 75 $150 $250

(Pb * Qb) + (Pf* Qf) = Current-dollar GDP

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Year


dollarGDP

Pb Qb PbQb Pf Qf PfQf

2009 $1.00 100 $100 $2.00 75 $150 $250

2010 $1.50 200 $300 $4.00 150 $600 $900

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YearP

bQ

bP

bQ

bP

fQ

fP

fQ

f

Real

GDP2009 $1.00 100 $100 $2.00 75 $150 $250

2010 $1.00 200 $200 $2.00 150 $300 $600


Base

Year

Year


dollar

GDPPb Qb PbQb Pf Qf PfQf

2009 $1.00 100 $100 $2.00 75 $150 $250

2010 $1.50 200 $300 $4.00 150 $600 $900

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GDP Deflator

GDP Deflatort = Current-dollar GDPt * 100

Real GDPt

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Converting Current-dollar GDP toReal GDP

Real GDPt = Current-dollar GDPt * 100

GDP Deflatort

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