0062J

Perekonomian Indonesia
Indonesia Economic Growth
Week 1
 Economic Growth

Economic growth is a process in which

there is an increase in real gross national
product or real national income.

Economic growth, occurs when there is an

increase in output per capita
 Sources of Economic
Growth Increase
(Chapter 31, Case, Fair, 2012)

1. The increase of labor

2. The increase of physical capital
3. The increase of human capital
4. The increase of productivity
 Economic Growth
Indicator

1. Gross National Product (GNP) or Gross

Domestic Product (GDP)
2. Per capita income
3. Income per working hour
 Calculating GDP
(Chapter 21, Case, Fair, Oster, 2012)

GDP can be computed :

• Expenditure approach : A method of computing GDP
that measures the total amount spent on all final goods
and services during a
• Income approach : A method of computing GDP that
measures the income—wages, rents, interest, and
profits—received by all factors of production in
producing final goods and services.
• Vallue added
 Expenditure Approach
of GDP

C I

G
X-M
GDP = C + I + G + (X - M)
Example : Expenditure
Approach of GDP
 Income Approach of GDP

With this approach:

GNP (Gross National Product) = employee compensation + proprietors' income +
rents + corporate profits + interest income
GDP = GNP + indirect business taxes + depreciation + net income of foreigners*
net income of foreigners = the income foreigner earn domestically minus the income
that domestic citizens earn abroad
Example : Income
Approach of GDP
(Chapter 21, Case, Fair, Oster, 2012)
Example : Income
Approach of GDP
(Chapter 21, Case, Fair, Oster, 2012)
 Gross National Income
(GNI)
(Chapter 21, Case, Fair, Oster, 2012)

• The concept of gross national income (GNI) is

GNP converted into dollars using an average
of currency exchange rates over several years
adjusted for rates of inflation.
• GNI = GDP in USD
• Income Percapita = GDP divided by
Population
Example : Income
Percapita
(Chapter 21, Case, Fair, Oster, 2012)
 Theories of Economic
Growth
(Chapter 25, Bade & Parkin, 2012)

The three growth theories that we study

are:
• Classical growth theory
• Neoclassical growth theory
• New growth theory
 Theories of Economic
Growth
(Chapter 25, Bade & Parkin, 2012)

• Classical Growth Theory

– Classical growth theory is the theory that the
clash between an exploding population and
limited resources will eventually bring economic
growth to an end.
– Malthusian theory is another name for classical
growth theory—named for Thomas Robert
Malthus.
 Theories of Economic
Growth
(Chapter 25, Bade & Parkin, 2012)

• Neoclassical Growth Theory

– Neoclassical growth theory is the theory that real
GDP per person will increase as long as technology
keeps advancing.
– Neoclassical growth theory predicts that
• Real GDP growth rate will equals the population growth
rate plus labor productivity growth.
• Real GDP per person will increase as long as technology
keeps advancing—economic growth will persist.
 Theories of Economic
Growth
(Chapter 25, Bade & Parkin, 2012)

• New Growth Theory

– New growth theory
– The theory that our unlimited wants will lead us
to ever greater productivity and perpetual
economic growth.
– According to new growth theory, real GDP per
person grows because of the choices people
make in the pursuit of profit.
 Calculating Economic
Growth
GDP 2010 GDP 2011

Population 2010 Population 2011

Income Income
Percapita Percapita
2010 2011

Economic Income Percapita 2011 – Income Percapita 2010

Growth = x 100%
2011 Income Percapita 2010
Indonesia GDP
(World Bank)
Economic Growth of
Indonesia
(World Bank)
Sources : BPS
GDP Projections
Thank You