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20 Cards in this Set

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Gross National Income (GNI)
The yardstick for measuring the economic activity of a country, it measures the total annual income received by a nation's residents.
How are GNI figures misleading?
They can be misleading because they don't consider differences of the cost of living. To account for differences one can adjust GNI per capita by purchasing power.
Purchasing Power Parity
An adjustment in gross domestic product per capita to reflect differences in the cost of living.
What country is the base for the adjustment of the cost of living?
United States.
There are many differences between the standards of living between different countries.
okay dude if you say so.
What do GNI and PPP data do?
They give a static picture of development. For example, they tell us China is much poorer than the US but they do not tell us if China is closing the gap. To assess this you would have to look at economic growth rates.
Amartya Sen
argued that development should be assessed by the capabilities and opportunities people enjoy. He said development should be seen as a process of expanding the real freedom people experience, hence, development requires the removal of major impediments to freedom; poverty as well as tyranny, poor economic opportunities as well as systematic social deprivation, neglect of public facilities as well as the involerance of represesive states. HE suggests development is a political process and to succeed citizens need a voice in important community decisions. Also he emphasizes basic health care and basic education.
Human development index
An attempt by the UN to assess the impact of a number of factors on the quality of human life in a country.
What is the HDI based on?
The Human Development Index is based on 3 measures: life expectancy at birth(a function of health care), educational attainment (measured by a combination of the adult literacy rate and enrollment in primary, secondary, and tertiary education), and whether average incomes, based on PPP estimates are sufficient to meet the basic needs of life in a country.
HDI Scale
The scale is from 0 - 1. Countries less than 0.5 are considered low on the HDI scale (the quality of life is poor). From .5 - .8 are classified as having medium Human Development. Those scoring above .8 have high development.
Innovation
Development of new products, processes organizations, management practices, and strategies.
Entrepreneurs
Those who first commercialize innovations.
What are the main causes of economic progress?
There is substantial agreement between economists that inovation and entrepreneurial activity are the engines of long term economic growth. This helps by creating new products and markets which did not previously exist. Plus they lead to an increase in the productivity of labor and capital, which boosts economic growth.
What conditions are requireed for the country to be conducive to innovation and enterpreneurship?
Freedom associated with a market economy provides greater incentive for inovation and entrepreneurship than a planned or command economy. An individual who has an idea and is free to make a profit from it will be more likely to go for it. Strong legal protection of property rights is another qualification. Without any property rights protection businesses and individuals run the risk that the profits from their innovation eforts will be expropriated.
Why is a planned economy not ideal for innovation?
In a planned economy the state owns all means of production. Consequently, entrepreneurial individuals have few economic incentives to develop valuable new innovations, because it is the state, rather than the individuals who captures most of the gains.
What happens in poor countries in regards to property.
Because most property in poor countries is informally owned the absence of legal proof of ownership means that property holders cannot convert their assets into capital, which could then be used to finance business ventures. Banks will not lend money to the poor to start businesses because the poor possess no proof that they own property that can be used for a loan.
There's a lot of debate regarding which political system best achives property rights and market economy.
totalitarian regimes have fostered a market economy and strong property rights and have experienced rapid econoic growth. Many in the west believe a representative govt. is best. Only a tolitarian regim that is committed to a market system and strong protection of property rights is capable of promoting econ growth. THis is a dictatorship, There is no gurantee that the dictator will continue to allow the system to function.
Democracy
Democracy is often the cause of economic progress.
What role does geography play in economic development?
By virtue of favorable geography, certain societies were more likely to engage in trade than others and were thus more likely to be open to and develop market based economic systems, which in turn would promote faster economic growth.
What effect does education have on economic growth?
Nations that improve in education will have higher growth rates because an educated population is a more productive population.