CDAE 272 International Economic Development Spring 2008

Class 02 Jan. 17 Last class: Syllabus Student information sheet Today: 1. Introduction Next class: 1. Introduction 2. Measuring economic growth & development Reading: Important dates:

1. Introduction 1.1. Economic growth and globalization 1.2. Rapid growth in world trade 1.3. Development patterns of selected nations 1.4. The U.S. economy and international trade 1.5. Potentials and challenges

1.1. Economic growth and globalization Indicators of economic growth (1) GNP and GDP Gross national products (GNP): The value of FINAL goods and services produced by the NATION’S factors of production (or by the nation’s citizens). Gross domestic products (GDP): The value of FINAL goods and services produced WITHIN the nation. Differences between the two: Potential problems of GNP and GDP: Examples:

An example A Vermont farmer sold 2000 lbs. of apples at $0.4 per lb. to a local supermarket, the supermarket sold 1400 lbs. of that as fresh apples at $1 per lb. and used the rest (600 lbs.) to produce 200 gallons of apple cider and sold the apple cider at $4 per gallon. What is the total contribution to U.S. GNP from these activities? Note that the contributions to GNP and GDP are the same in this example.

Another example Save U More, a grocery in Iowa, purchased 2000 lbs. of apples from a farmer in Canada at $0.4 per pound, sold 1600 lbs. of that as fresh apples at $1 per lb., used the rest (400 lbs.) to produce 150 gallons of apple cider, and sold the apple cider at $4 per gallon. What is the total contribution to U.S. GNP and what is the total contribution to Canadian GNP from these activities? Question: what are the contributions to Canadian GDP and U.S. GDP?

1.1. Economic growth and globalization Indicators of economic growth (2) Per capita GNP and GDP (3) Productivity Productivity = output / input Examples: Labor productivity Land productivity Capital productivity Population productivity

1.1. Economic growth and globalization Economic growth and indicators (4) Growth rate -- how to calculate growth rate? Examples: If the per capita GNP increased from $2000 in 2000 to $2050 in 2001, what was the growth rate? How about if it dropped from $2050 in 2001 to $2000 in 2002? Another example: if the per capita GNP increased from $1000 in 1990 to $1464 in 1994, what is the average annual growth rate?

1.1. Economic growth and globalization Economic growth and indicators (5) Other indicators Life expectancy Death rate Index of happiness ……

1.1. Economic growth and globalization World economic growth since 1970 See the slides from CDAE272class02B