Economics

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Economics
Introduction
Economic Dynamics
Investment
Trade
Financial Flows Transfers
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Introduction
Economic growth has come to be a fixture of the
global economy over the last 200 years, and
leaders devote much effort to selection of
policies that will sustain or even increase that
growth.
Raising a countries GDP (gross domestic product)
to near the global per capita level is very
important. Dramatic social transformations occur
in almost all societies when GDP per capita
grows to reach the global average.
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Economic Dynamics
Economics, like all issue areas in this book,
involves an interaction of possible positive and
negative feedback loops.
Gross domestic product, the total production of
Goods and services, measures production in a
country.
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Prices
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Production
Demand
Inventories
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Capacity Utilization
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Investment
There is very little debate about the importance
of increasing investments shares of GDP in
order to enhance economic performance. The
economic growth rates in the 21st century could
exceed that of the 20th.
First, global economic growth has been on a
generally accelerating path for more than
200 years.
Second, countries at lower levels of GDP
per capita can dramatically increase their
growth rates through the adoption of existing
technology from richer countries.
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All the same, we know that the economic change
of The 20th century was extremely uneven and that
Income inequalities among and within
countries Increased markedly.
The per capita gap in gross domestic product
between the richest 20 percent of the worlds
population and the poorest 20 percent increased
from 30-1 to 61-1 just between 1960 and 1991
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Trade
In 1995, the international community heralded the
arrival of a new institution the World Trade
Organization.
The continued advance of this organization
testifies to the strength of belief that market
open to trade flows will bring economic benefit.
In fact, globalization, the widespread opening
of trade and capital markets became a dominant
theme of the 1990s
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The standard theory of trade that has dominated
both academia and global policy for most of the
20th century posits that when two parties enter
into trade, both benefit from it. Presumably,
trade would not occur if the parties did not
both perceive such benefits, because trade is
not obligatory.
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Global Financial Flows and Transfers
Investment also takes place across country
borders, raising important questions in the
process. Countries, especially less developed
ones, often seek to attract capital from abroad
in the hopes of increasing the GDPs.
Interstate fund flows may or may not
enhance investment levels in the target country.
In short, attracting money from abroad has
somewhat uncertain implications for the
enhancement of investment.
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Third World countries attracted large volumes of
loans in the 1970s, some of which they used to
enhance domestic savings and investment and
some of which simply increased consumption.
These countries have very difficult times
repaying these loans.
In 1982 the total external debt of LDCs was
836.1 billion by 1998, that had grown in
nominal terms to 1,839 billion.
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The ability of funds from abroad to improve
economic well-being is uncertain in developed
countries as well. It is important to
understand that the inflow and outflow of funding
from abroad is closely related to the two other
issues of our leverage discussion
savings/investment and trade.
Savings Investment (domestic) Exports
Imports Investment (foreign)
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Quiz Questions
When was the World Trade Organization created
a) 1970
b) 1988 c) 1995
d) 1990
Economic growth has been increasing over the
past a) 50 years
b) 100 years c) 150 years
d) 200 years
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Quiz Questions
What was the external debt as of 1998?
a) 900 million b) 874
billion c) 1,500 billion
d) 1,839 billion
T F Economics involves negative and
positive feedback loops
T F GDP of a country does not affect
its countries social well
being.