Wealth Test Review

What does GDP stand for? Gross Domestic Product It is what is produced in goods (products) and services in one year.

What do we mean by per capita? It is Latin for “per person”.

What is the difference between imports and exports? Imports are products or resources that are brought into a country. Exports are products or resources that are sold to other countries.

What is inflation? Inflation is the increase in the price of goods and services from one year to another. It is caused by other economic factors. Example: the rise in the price of gasoline could lead to the rise in the prices of other products.

What is the HDI and what factors are used to calculate it? It is the Human Development Index. Life expectancy at birth, GDP per capita, Literacy rate and the average years of schooling.

Name two countries with very low HDI values and two other countries with high HDI values. Low: Liberia and Ethiopia High: Norway and Denmark

What is the advantage of using the HDI to measure wealth instead of the GDP? The HDI looks at social factors (life expectancy, education, literacy) as well as money. A country can have a high GDP but its citizens don’t always have a great quality of life.

What are three factors that might cause economic growth? Government investment Lowering taxes (to give people more spending power) Improving production Trade deals (new markets to sell goods)

What is globalization of trade? It trading with different parts of the world. Making one single product can involve multiple countries in the process. Example: Cotton in India is sent to Vietnam where it is used to make a T-shirt. The T-shirts are then shipped to North America to be sold.

What are advantages and disadvantages of the globalization of trade? Pros: - Cheaper products for consumers, can create jobs (in retail or other industries) Cons: - Can lead to job loss (jobs moving to other countries), can create situations where workers are exploited

What is fair trade and how is it different from free trade? Fair trade: a system where all of the workers are involved in producing a good or service and are paid a “fair” wage for their work. Free trade: economic policy which wants to eliminate or reduce barriers to trade (example: reducing tariffs on foreign goods).

How does the distribution of resources affect the distribution of wealth in the world? A country with abundant natural resources (minerals, timber, rubber, etc.) will be able to develop them and generate wealth. A country that lacks these resources might not be able to develop and generate as much wealth.

What is the advantage for a European country to be in the European Union? Using the Euro as a common currency makes trade easier because you don’t have exchange rates. It is easier to travel between countries.

What do the IMF and the WTO do? The International Monetary Fund lends money to countries. In exchange, those countries must make certain changes in their policies. The World Trade Organization wants to expand free trade in the world. They want to bring down protectionist policies.

How are developed, developing and least developed countries different from each other? Developed: HDI value of at least 0.8 Includes North America, most of Europe, and parts of Asia, Africa and Oceania. Service sector jobs and technology-related jobs. Developing: HDI value between 0.8 and 0.5 Includes many countries in the southern hemisphere. Manufacturing sector is often very important.

How are developed, developing and least developed countries different from each other? Least Developed: HDI value below 0.5 . Includes many countries in Africa and in Asia. Countries often depend on primary sector (farming, mining, etc.) Poor economic situation.

How do countries end up in debt? Government spending, on infrastructure (roads, bridges, airports, etc.) and on social programs (like welfare) can lead to a debt.

From whom do countries get loans? They get them from banks, other countries, the World Bank and the IMF.

What are the consequences of indebtedness for a country? Possible reduction in government spending. Privatization (government-run sectors become privately owned). Bigger gap between rich and poor. Greater dependence on foreign aid.

What are non-governmental organizations and what effect do they have? NGOS are groups not controlled by governments that are involved in different issues (health, access to food, human rights, etc.). Examples: OXFAM, Doctors Without Borders They are involved in different world issues and can be influential.

Other Concepts GINI index (measures how big the gap is between rich and poor) Supply and Demand