Download Economics: Capital and GDP 3-3

Economics: Capital and GDP
Income
Expenses
Capital
Human
Capital
Literacy Rate
Life
Expectancy
Physical
Capital
Natural
Resources
Entrepreneur
Gross
Domestic
Gross
Domestic
Product
Per Capita
Per Capita
Gross
Domestic
Product
3-3
The money that comes in. Your pay is your income. If he pays you
rent, or if she pays back money she borrowed, that counts as income.
The money that you pay out. You pay rent, you pay for food, you pay
back the money he let you borrow, you buy a hat, you go to the movies.
A pile of money. An accumulation of wealth. A separate, huge amount
of money that is not part of your regular income or expenses. You
haven’t spent it—yet! It is potential. Capital lets you do something big!
Most regular people don’t have a big blob of capital. Banks have capital.
The potential power of workers. The level of health, education,
training, and skills of the workers in a country. If workers are healthy
and expert, that’s a high level of human capital. If workers are hungry
and sick, and have no education, that’s a low level of human capital.
The percentage of the population that can read at a fourth-grade level.
Countries with a high literacy rate often have successful economies.
How long the average person lives in a certain country. In Norway, the
average age of death is 83. In Russia the life expectancy is 68.
Equipment for business. Roads, factories, ports, railroads, airports,
mines, buildings, technology. A country with a high level of physical
capital is a good place to do business. A country needs capital (a pile of
money) to build physical capital (a railroad line leading to a seaport.)
Gifts from nature. Trees, rivers, coal, oil. Natural resources help a
country’s economy. Humans don’t create natural resources; we figure
out ways to use them as raw materials and energy to make money!
A person who has an idea and starts a business. Entrepreneurs usually
start small, but they need to borrow capital if they want to expand their
businesses. Banks lend capital to entrepreneurs with solid plans.
Total. In economics, gross doesn’t mean icky. The gross amount is the
total, whole, entire amount.
At home, within a country. International problems involve several
countries. Domestic problems are within one country.
The total value of all goods and services produced within one country in
one year. How much a country produces. This is one way to measure
the size of a country’s economy. A successful country has a high GDP.
Per person. From Latin,”for each head.” Twelve apples shared by four
people is three apples per capita, or three apples for each person.
How much a country produces per person. Per capita GDP is how much
a country produces divided by the number of people. This is the best
tool to measure a country’s economy and a fair way to compare the
economies of different countries. Learn to use the per capita GDP to
brag: My country’s per capita GDP is higher than your country’s.
Economics: Capital and GDP
Definition
N
D
3-3
C
Term
Examples
equipment for business
entrepreneur
Education, health, skills
expenses
$10,000 to start a new business
How long people live
40% of our population can read
I make $8 an hour.
Here are three fictional countries. Use this information to answer these questions.
Tishban
Calormen
Beruna
Tishban has rivers, forests, and
an ocean coast. It has a huge
agricultural plain. It delivers food
to the continent on a network of
highways. Food processing plants
are located along the coast. The
life expectancy is 70 years. The
per capita GDP is $5,000. The
population is 300. Most people
work in agriculture or
manufacturing.
The population of Calormen is
200; the gross domestic product
is $400,000. The literacy rate is
40%. The life expectancy is 60
years. Calormen is a hot, windy
desert; it does not have an ocean
port. There is a small airport, no
railroads, and one major highway
to the capitol. In the industrial
zone there are three small
factories.
Beruna is a tiny country known for
high-tech, entrepreneurial
economy. The population is 100,
and the GDP is $1 million.
Beruna has many factories and
an excellent railroad system. The
literacy rate is 99%. Four
universities and two medical
schools conduct research.
Beruna has a very small
agricultural sector.
1.
2.
3.
4.
5.
6.
7.
8.
What is the gross domestic product of Tishban?
What is the per capita GDP of Calormen?
What is the per capita GDP of Beruna?
Which country has the highest per capita GDP?
What do you predict is the life expectancy in Beruna?
What do you predict is the literacy rate of Tishban?
Which country has the highest literacy rate?
Does high per capita GDP connect to high literacy rate or low? Why?