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Lecture 7

PM Lecture 7 Impact of Risk and Entrepreneurship on Economic Growth

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CAS EC 102
Jay Zagorsky

PM Lecture #7: Impact of Risk and Entrepreneurship on Economic Growth Monday, April 7, 2014 11:30 AM Why Do Managers Care? - A country's standard of living depends on its ability to produce goods and services ○ Rich countries can produce more than poor countries - The higher the standard of living, the bigger the market for products Why Are Some Countries Rich and Others Poor? - According to economist,Jean Baptiste Say, what a country produced was based on the following: ○ Amount o land it had (Land) ○ Number of people (Labor) ○ Factories (Capital) ○ Number and quality of risk-taking entrepreneurs Jean-Baptiste Say - Articulated the economicidea of laissez-faire ○ Gov't should not interfere with the economy.By leaving the economyalong, the economic pie would naturally end up as large as possible How Can a Country Grow? - One method is to make a country's citizens take more risk ○ Why is risk important to macroeconomics?  Entrepreneurs help a country dramatically increase GDP □ Entrepreneurs are risk taking people □ Counter Point: Malcom Gladwell does not believe that entrepreneurs are risk taking, instead, they are people who recognize great low risk opportunities that has a good pay off  New companies are important in the economy □ Number of new businesses formed  Most people are risk adverse, because of diminishing marginal utility ◊ Shown by d
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