WORLD ECONOMY

Activity 1
Extreme poverty: people that live with less than 1.9$ per day.
Recession: the production of a country goes down, if compared to a previous timespan (fall in
GDP).
Household income: the money that the members of a family receive for participating in specific
activities.
GDP pro-capita: GDP divided population (the same of income pro-capita) -> it is linked with
economic capacity, welfare in the country and productivity.
Mortality rates: the number of deaths in a human area; number of deaths divided by 100.000.
Positively correlated: relation between two variables -> a change in one variable causes a change
in the second one, that goes in the same direction.
Distribution of income: distribution of income, on average, within a certain population -> mischief
Ing concept
- It’s related to income-inequality
Furlough programs: money that the government gives people and factories, in potential-crises
situations.
- It’s a public program, aimed at helping people in times of crises.
Central banks: Positive correlation between income and life expectancy.
 QUESTIONS:
Question 1
The relation is positive: in richer countries more years were lost, if compared to poorer
countries. - Why?
Aging: the percentage of old people own richer countries is higher than it is in poorer
countries. Higher life expectancy
Urbanization
Mobility
- years lost decrease in life expectancy
Income is the independent variable, while health is the dependent one.
 Question
Health inequality: different levels of health, basing on the income
1. Inequality among countries
• every country weight the same and the focus in on income pro-capital.
-> Inequality among countries has declined during the pandemic.
- In certain countries the disease has not caused serious damages
• countries weight, basing on their population
-> Inequality among countries has increased, due to the weight of India
2. Inequality within countries: individual incomes within countries
It has risen, due to the pandemic.
- White- and blue- collar jobs.
-> Low-income jobs were more exposed to the crises.
- Education inequality: poorer children are going to receive a poorer education.
 CURRENT SITUATION
The main problem in poorer countries is represented by food and inflation.
-> When richer countries started to recover, there was a huge demand of raw materials, causing a
supplying-chain disruption.
- The slow pace of raw-materials-mobility caused inflation.
- War in Ukraine -> the inflation worsened, as poor countries rely on the products, whose prices
have raised, due to the war.

Kristalina Georgieva’s director.

-> Director of the IMF, an institution born in Bretton Woods, after WWII (more stable financial
structure in the world).
- The members pay an annual contribution, with the aim of helping needing countries.
-> Some countries suffered a bail-out… they received money, part of which came from the IMF.
-> Mark the economic problems and explain them.
 TYPES OF PROBLEMS we have in ECONOMICS
->Economic problems can be distributed according to two criteria:
- DIMENSION -> real, monetary, financial
- Real dimension of the economy: everything that is related to production
- Monetary: everything that is related to the money, to be considered as an instrument we use to
satisfy our needs (with attention on keeping its value)
- Financial: everything that is related to the connection with the savers and the borrowers, within
the financial system.
NATURE -> temporary (linked to the economic activity: they go away when the economic crisis
disappears), structural (it’s in the roots of the economy; it’s about the way of production and
consumption and it’s not directly related to the crises).
Structural problems: environmental problems and climate change
Temporary problems: unemployment
sometimes, however, unemployment is structural: it’s linked to the skills of the workers (lack of
skills demanded by the market); it’s, then, linked with education.
Now a days artificial intelligence causes structural unemployment: those people who are not
flexible enough or lack the skills the market demands will become structural unemployed.
- Solution to structural problems: investments in education.
- Solution to temporary problems: growth
INFLATION: the value of money decreases.
- Less things with the same amount of money.
-> Inflation is often with the amount of money circulating in an economy. If there is too much
money circulating in the economy, in relation to the production, inflation goes up.
-> If the increase in the quantity of money is accompanied by an increase in the capacity of
production, inflation won’t be a problem.
Current inflation: nowadays, inflation is mainly linked to the prices of raw materials.
SUBPRIME MORTAGE: banks give credit to people who can’t afford to pay them back.
- the price of the product rises up. Example: houses -> bubble in the house market
- When the bubbles brake, banks go bankruptcy and financial crises arise.
-> Mortgage: borrowing money with a specific purpose; no pay back -> the bank keeps the bought
thing.
EXTERNAL DEBT: a country borrows money from other countries -> financial problem
 REAL PROBLEMS: five types:
-> ALLOCATION: related to which goods and services are produced in an economy.
- The resources to produce are limited; for this reason, we have to decide which goods to
produce and with which combination of resources.
-> PRODUCTION: it turns into income all the time (with the value of production incomes are
generated); related to the way that the products are produced
-> DISTRIBUTION: related to who is keeping the product (income distribution) -> inequality,
poverty…
-> STABILITY: related to problems to maintain current level of production
- people in uncertain situations tend to stop consuming and business owners tend to paralyze their
investment projects
- when a crisis is coming, instability appears
Animal spirits: psychological component that shapes our decisions (possession of information to
make a wise decision)
-> GROWTH: related to the possibilities of increasing the level of production. Unemployment can
be related to all the five categories…
-> It could be related to allocation: the amount of goods produced doesn’t require to hire as many
people as available
-> The chosen resource combination doesn’t match the available amount of work-offer.
-> When unemployment benefits are over, jobless people become poor.
-> Uncertainty and lack of information worsens the condition of jobless people, thus causing even
more instability
-> People willing to work, with no possibility of finding a job, due to the incapacity of finding a way
to produce more and introduce them in the production system.
- Problems belonging to a category can end up matching another one.
-> I.g. External debts: financial problem that turns to a real one, in terms of distribution.
-> I.g Inflation: monetary to real -> scarcity of raw materials… (it affects the production of the
goods we need to satisfy our needs)
- Inflation is a stability problem: uncertainty regarding the price of raw materials
-> I.g. corruption: stability problem
-> I.g. environmental problems: growth problems (growth vs environmental targets)
 PUBLIC/GOVERNMENT DEFICIT
Every year the Government presents to the Parliament public budget documents, specifying the
expenses the country will face in the coming year, as well as the public revenues (income).
-> Sources of RI: taxes and fees
-> PD: the expenses exceed the revenues
-> If the Government has a deficit, it ISSUES PUBLIC BONDS.
-> PD becomes a problem when the Government borrows money but can’t bay the investors back.
- The accumulation of a very high PD can turn into a serious problem in the public finance.
- InPD situation, the Government is very likely to increase taxes or to decrease public spending,
which causes instability.

Activity 3
Question 1
Tipping points: are editions beyond which changes in a part of the climate system perpetuate
themselves beyond the warming threshold.
The Paris Agreement: The Paris Agreement is an international treaty between the member states
of the United Nations Framework Convention on Climate Change (UNFCCC), concerning the
reduction of greenhouse gas emissions and finance, reached on 12 December 2015, covering the
period from 2020.
Zero-carbon: Zero emissions is a statement that has now entered the common lexicon to indicate
a product, a service, an event or an organization whose CO2 and greenhouse gas emissions are
zero, thus not contributing to global climate warming.
Sustainable development: is development capable of satisfying the needs of the current
generation without compromising the satisfaction of the needs of future generations.
Natural capital: is the world stock of natural resources, which includes geology, soil, air, water,
vegetation and all living organisms. Some natural capital resources provide people with free goods
and services, often referred to as ecosystem services.
Question 2
A structural problem is a situation that causes damage in terms of money, time, management. A
temporary problem is a situation that can be resolved in a short time without causing further
damage.
Changes in temperatures can cause a variety of medium and long-term consequences. melting of
polar caps and perennial ice, sea level rise, increase in the quantity and intensity of meteorological
phenomena hurricanes, tsunamis. Increased hydrogeological and flood risk. The frequency of
intense precipitation events has increased in most of the landmasses, in line with the warming and
increase of atmospheric water vapor, increased drought and increased risk of fires in some parts
of the world. Exponentially increasing the amount of greenhouse gases means creating a
significant overheating of the earth's crust. Climate change also influences the production of the
poorest nations, where, in the long run, it entails a slowdown in economic growth; It will impose
rising energy costs. Heat waves and intense phenomena will begin to affect the overall mortality
and morbidity rate and consequently on labor productivity. Extreme phenomena will aggravate
economic crises already underway.
Question 3
Many authors need to make changes. The world needs to development a global price for carbon
linked to a fair social fund for climate mitigation and adaptation. Climate education should be part
of the school. Implement policies that address the root cause of the problem ie the over-
exploitation of the land.
Question 4
The development and launch of new zero-carbon inventions and the inventions of new
technologies certainly lead to high economic costs that will create an initial cost for sectors of the
economy. However, the most important financial benefits of these actions come from avoiding the
resulting disastrous effect of climate change would have on our society.
Carbon leakage: When industries go abroad to avoid paying taxes.
Question 5
The three goals are prosperity, inclusion and sustainability. These points should not be looked at
only in terms of money. We need to growth to development.

Activity 4
Question 1
Inflation: General increase prices, is the rate at which prices for goods and services rise.
Recession: A recession is a significant decline in economic activity that lasts for months or even
years.
Monetary policy: addresses interest rates and the supply of money in circulation, and it is
generally managed by a central bank.
Fiscal policy: addresses taxation and government spending, and it is generally determined by
government legislation.
A supply bottleneck refers to congestion caused by a resource that requires the longest time in
operations process.
The European Union Emissions Trading System: is a "cap and trade" scheme where a limit is placed
on the right to emit specified pollutants over an area and companies can trade emission rights
within that area. It covers around 45% of the EUs greenhouse gas emissions.
Carbon pricing: is an instrument that captures the external costs of greenhouse gas (GHG)
emissions.
The Carbon Border Adjustment Mechanism: is a carbon tariff that will be implemented in the EU
from 2027. This new system will apply to certain raw material products and would see importers
purchase carbon certificates in relation to the number of emissions generated by the production
of the goods.
A renewable resource: is one that can be used repeatedly and does not run out because it is
naturally replaced. A renewable resource, essentially, has an endless supply such as solar energy,
wind energy, and geothermal pressure.
Recovery and Resilience Facility: The Recovery and Resilience Facility is the centerpiece of the
NEXT GENERATION EU program, support prices of the countries, the green, digital revolution,
growth the counties in the investments.
The current European interest rate ECB (base rate): is 0.000 % European Central Bank, The
European Central Bank (ECB) is the central bank for the eurozone (euro area, the countries which
have adopted the euro). One of the ECB’s important tasks is to set and implement European
monetary policy. This includes the use of the interest rate tool. Applies to commercial banks.
Question 2
Inflation should be 2 %. Manage supply changes and risks, fueling positive demand and forces that
could sustainably drive inflation towards our 2% inflation target. It ensures that we will only react
to major inflation improvements that are durable and reflected in underlying inflationary
dynamics. And the this allows for inflation to move moderately above target for a transitional
period. In terms of supporting demand, our monetary policy will continue to deliver conditions
necessary to fuel the recovery. Prices stability.
Question 3
Fiscal policy that will have to improve productivity, which means that it facilitates structural
changes in the economy and shifts activity towards future-oriented sectors and carries out the
reform programs agreed in the context of recovery and resilience in a medium-term perspective,
fiscal policy will need to follow rules and support both debt sustainability and macroeconomic
stabilization. Monetary policy is committed to maintaining favorable financing and conditions for
all sectors of the economy during the period of the pandemic. The impact of the green transition
on inflation will ultimately hinge on the development of energy supply and the net effects of fiscal
measures. Energy mix is the combination of the resources, as oil, gas, is going to flat in the future.
Question 4
The economy has recovered but as a result it is rapidly changing economic cycles, this leads to
inflationary swings. The consecutive of the pandemic.
Inflation is driven by shocks such as: mismatches between supply and the demand on world
energy markets which has led to an increase in energy prices in the euro area. The Russia-Ukraine
war amplified both factors and at the same time increased global food prices. The second shock
that drives inflation is the recovery of domestic demand with the reopening of the economy after
the pandemic. Spending is rotating from goods to services as restrictions are lifted while they are
repressed the demand for tourism and recreation is proving unexpectedly strong.
Real wage growth was negative. This problem is also reflected in companies trying to protect their
margins. Market consumption and household savings during the pandemic certainly helped
maintain income from work.
Lesson 2
Measurement of economy activity
1. Production->is a value/ income-> (renta) is the payment that someone receive and produce
of other service.
2. GDP comparisons and convergence
GDP can be measured in three ways:
- Output
- Expenditure
- Income
GDP= C->companies I-> investment, G-> Government, X->value of exports, M->minus imports.
GDP per capita, PPP
Convergence-> in the Europa, GDP poor countries.