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Transcript
Welcome to class of Economic Forces by Dr. Satyendra Singh University of Winnipeg Canada Dimensions of the Economy… Important Economic Indicators Gross National Income (GNI) GNI/capita Purchasing Power Parity Income Distribution Private consumption Unit labor costs Exchange rates Inflation rates Interest rates Balance of payment (BOP) Dimensions of the Economy • Gross National Income (GNI) – The measure of the income generated by a nation’s residents from international and domestic activity – Preferred over GDP • GNI/Capita – Used to compare countries with respect to the well-being of their citizens and to assess market or investment potential Kinds of Economy… • Formal economy – Visible, Recorded, Audited – What % of GDP is owned by government • • • • UK: 10% 4% China: 80% 50% Chie: 75% 25% Mexico: 66% 33% Informal Economy (Street, undocumented…) Underground Economy – Illegal!, USA (10%) Why Privatize? • • • • • To get $ from firms Increase firm profitability Ideological reasons Preserve jobs … • Unfair because government firms – – – – – – ↓ price unfairly ↓ financing rate ↑Get government contract Expert assistance ↓ wages ↑ Has more resources Characteristics of Economy • Developed countries spend twice on – Food – Clothing –… • Developing countries spend twice on – – – – Transportation White goods Healthcare Wine/ cigarette Effects of Economy • Sales willingness to purchase low • Wage rate • Labor supply • Union contract Wal*Mart Economy • • • • $+450b sales 4000 stores 30 countries Only 40 countries (out of 227) above Wal*Mart • Ghana $40b (ppp 80b) • Manitoba $50b Economic development Measurement (GNI/Capita), World Bank • • • • Low Income (<$1000) Mower middle income ($1000-$3000 Upper middle income ($3000-$9000) Higher income (>$10000) • • • • Canada $40,000 India $4,000 China $9,000 Ghana $3,000 Levels of Economic Development • Developed – Nations that are the most technically developed • Newly industrialized economies (NIEs) – The fast-growing upper MIG and HIG economies such as Taiwan, Hong Kong, and Singapore • Newly industrializing countries (NICs) – Brazil, Mexico, Malaysia, Chile and Thailand • Developing – Nations that are less technically developed • Emerging Markets – Transformation from controlled to market economy Purchasing Power Parity (PPP)… – The number of units of a currency required to buy the same amount of goods and services in a domestic market that $1.00 would buy in the U.S. – Helps to make comparisons possible across economies CIA Fact Book Purchasing Power Parity (PPP) If, 1 Lt. Milk 1 Lt. Milk US India $1.00 Rs. 20.00 Then, PPP: US $1 = Rs. 20 Reality: US $1 = Rs. 40 ie Rs. is 50% undervalued – artificially?! However, PPP is based on consumer expenditure on basket of essential goods