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ECON 313 notes pre quiz 1.docx

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Economics (Arts)
ECON 313
Matthieu Chemin

thSeptember 11MEASURES OF ECON DEV GDP market value of all goods and services produced within a country in a give period of time Can be measure on the income or expenditure side GDP per capita is the GDP per person Some basic indicators income per capita per yearPPPlife expectancy prevalence of undernourishmentunder 5 mortality per 1000 live births crude birth rate adult literacy for malefemale You can divide them between income group country and region o income per capita in the USA is 43560 compared to the one in Congo which is 120shows gap of income level and shows poorrich gap o Low income group have an average of 585 income per capita vs high income groups which have 35264 Problems with GDP doesnt take into account quality of lifehealth doesnt show wealth distribution within the country black marketsinformal sector pollutionexternalities volunteerunpaid work doesnt count for production outside of the country doesnt take into account political issuesgov regimes corruption doesnt look at GDP of different groups bad dataProblem one GDPPPPHow to compare GDP across countries Use official exchange rates valid for internationally exchanged goods BUT domestic goods may be much cheaper in LDC due to lower cost of life So this may be good for internationally traded goods The law of one price affects demand and supply to make the price of a good the same all around the world This is affected for internationally traded goodso Solution is PPP becauseAcccount for cost of lifeCollect data on domestic prices of 150 categories of goods and services in each countriesConstruct international pricesGDPquantity x these international pricestherefore use PPP not GDP Because PPP accounts for the cost of life and GDP doesnt GDP is underestimated if we dont look at cost of life There are less disparities between countries because the gap between PPPs s smaller than the gap between GDPs this is between for LEDCs PPP value is higher than GDP value This is not the case for MEDC Problem two technicalinformal sector quality of data domestic consumptionhousehold labour is not taken into account environmental destruction Problem three negative LR consequence on econ growthresource exhaustion oil tech progress pollution is the solution less growth Does growth and polluters face the full costs of pollution Problem four philosophicalGDP growth is the accumulation of goods and services are they just mindless searches Advantages of GDP adapted to measuring economic dev simple comparable one numberIs GDP a goodmeasure of dev o YES relevant for poor people can buy you the basic needs such as food shelter security it gives you the possibility to buy these goodsor not if you want to live a more spiritualit gives you the freedom to buy or not to buy o NO sens capabilities approach Approach dev as freedomFunctionings what a person can do with the commodities Eg book bicycleCapabilities ways to convert commodities into functionings Eg educationPeople use different functionings of commodities due to their different capabilities This shows that people have different values of things
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