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Measuring Growth and

Development
Econ 112
Economic Development
Dr. Haight Fall 2014

Housekeeping
Readings
Text Chp 2
Two supplemental readings on the MDGs

Tasks
Start forming your video project groups
4-5 people
Proposal due Sep 17
Choose your first book and start reading

Provocative Lecture
Dr. David Skarbek
5:15-6:45pm Student Union Theatre Sep 8
Why do Prison Gangs Exist?

Measuring Economic
Growth
Gross National Product (GNP) value of all

finished goods and services produced by a society

during a given year (includes that produced by
citizens outside the country)

Gross Domestic Product (GDP) value of all

finished goods and services produced within a

country durng a given year

Per capita income GDP or GNP divided by the

population

Real numbers are adjusted for inflation

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Measuring GDP
What doesnt GDP capture?

Lots of informal or extralegal income

Income distribution
Price differences
Currency issues
Value of leisure
Environmental Factors

Is GDP the same thing as productivity?

Productivity is the effectiveness with which factors of production are
converted into output.

Problems with GDP

measurements
Activities that are not included mean GDP is
understated

As countries grow, and more is accounted for, GDP

growth can be overstated

Measurement and tracking in developing world can

be unreliable

GDP doesnt account for things like pollution,

depletion of natural resources, crime levels,
congestion. Should it?

Exchange Rate Conversion

To compare different countries GDP/GNP, must
convert to the same currency.

Problems:
Exchange rates can be distorted
Non-tradable goods (haircuts)
Exchange rates determined in part by trade

Solution: Purchasing Power Parity

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Calculating PPP

Economic Growth
A new economic topic!

The History of Economic

Growth
Doesnt really exist
From 0AD to 1000AD, essentially no growth at all
For next 800 years.and increase of only 50%
For comparison, Chinas GDP per capita increased
50% over a 5 year period!

Economic Growth began for some countries in

approximately 1820. Why? What happened to
change things?

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GDP by region over time

Housekeeping
Readings
Text Chp 2
Two supplemental readings on the MDGs

Tasks
Start forming your video project groups
4-5 people
Proposal due Sep 17

Choose your first book and start reading

Provocative Lecture
Dr. David Skarbek
5:15-6:45pm Student Union Theatre Sep 8
Why do Prison Gangs Exist?