This short paper will examine Michael Spence’s article, “Why China Grows So Fast,” printed in the December 23th, 2007 edition of the Wall Street Journal. In this paper I show that Spence’s article about how is it very important to understand the economic growth and the production function that have led Chine to grow economically fast. In addition, in this paper I show how an economy’s gross domestic product (GDP) in China is increasing due to their huge labor force and population. Also, in 1978, China’s labor has switched from Communism “make work” to Capitalism “productive positions” by the politician and reformist leader of the Communist party of china Deng Xiaoping, so that has led the country towards a market economy. So these were the
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In this section, I briefly summarize macro-theory. According to Mankiw, buyers represent the demand curve (downward slope) and sellers represent the supply curve (upward slope). Besides these two basic economic concepts, chapter twelve focuses on the production function and the growth. Where an economy’s gross domestic product (GDP) measure both the total income earned in the economy and the total expenditure on the economy’s output of goods and services. So economists use production function to describe the relationship between the quantity of inputs used in production and the quantity of output from production. As Y stands for real GDP, L stands for hours worked, H stands for human capital, K stands for physical capital, N stands for natural resources, A stands for technology, and F is a mathematical function. Thus, production function is a mathematical relation between output and inputs. In other words, Y=AF (L, K, H, N). So we have to reference to these four functions to determine a country’s …show more content…
Spence says that education is a signal to employers, as employers can learn and adopt quickly. Also, Spence points that the agricultural sector is usually the location of a vast majority of the people. Also, Spence claims that 13 million people move to cities each year and this movement has increased the productivity sectors, which has served global economy demand. Thus, as this movement keeps increasing also, high productivity is increasing too; it is possible for everyone to be better off. Moreover, Spence’s call for governments to help the people directly, rather than trying to protect jobs and firms. Furthermore, Most of its labor force goes into production and manufacturing. Because of that, China is the world’s largest producer. However, it has been reported that labor wages are low compared to other countries and the Chines currency is low compared to their economics position. But that has an advantage to China, as most of their revenue has yet to be collected with over 1.3 trillion in U.S debt alone. So that debt collection will result in higher standards of living for the people as their currency value will increase as money supply will increase and so the people of China’s consumption will
In this section, I briefly summarize macro-theory. According to Mankiw, buyers represent the demand curve (downward slope) and sellers represent the supply curve (upward slope). Besides these two basic economic concepts, chapter twelve focuses on the production function and the growth. Where an economy’s gross domestic product (GDP) measure both the total income earned in the economy and the total expenditure on the economy’s output of goods and services. So economists use production function to describe the relationship between the quantity of inputs used in production and the quantity of output from production. As Y stands for real GDP, L stands for hours worked, H stands for human capital, K stands for physical capital, N stands for natural resources, A stands for technology, and F is a mathematical function. Thus, production function is a mathematical relation between output and inputs. In other words, Y=AF (L, K, H, N). So we have to reference to these four functions to determine a country’s …show more content…
Spence says that education is a signal to employers, as employers can learn and adopt quickly. Also, Spence points that the agricultural sector is usually the location of a vast majority of the people. Also, Spence claims that 13 million people move to cities each year and this movement has increased the productivity sectors, which has served global economy demand. Thus, as this movement keeps increasing also, high productivity is increasing too; it is possible for everyone to be better off. Moreover, Spence’s call for governments to help the people directly, rather than trying to protect jobs and firms. Furthermore, Most of its labor force goes into production and manufacturing. Because of that, China is the world’s largest producer. However, it has been reported that labor wages are low compared to other countries and the Chines currency is low compared to their economics position. But that has an advantage to China, as most of their revenue has yet to be collected with over 1.3 trillion in U.S debt alone. So that debt collection will result in higher standards of living for the people as their currency value will increase as money supply will increase and so the people of China’s consumption will