1. The Global Economic Environment
The Coming Boom
1974-
1993
1994-
2003
Wealthy Industrial Countries
Developing Countries
East Asia
South Asia
Latin America
Eastern Europe*
Sub-Saharan Africa
Middle East & North Africa
*Includes former Soviet Union
Real GDP growth, annual average %
Source: World Bank, The Economist

2. Economic Systems Capitalist Market allocation of resources Socialist
Command allocation of resources
Mixed
Reality-a variation in between.

3. Economic Freedom An index with consideration of: trade policy
taxation policy
government consumption of economic output
monetary policy
capital flows and foreign investment
banking policy
wage and price controls
property rights
regulations
the black market.

4. Country Income Segmentation
High Income (Advanced Countries)
- Triad
- Others
Upper Middle Income (NIC's)
Lower Middle Income (DC's)
Low Income (LDC's)
+ $9,385
+ $3,036
+ $765
< $765

5. National Production Gross National Product (GNP) Gross Domestic
Product (GDP)

6. Drawbacks of GNP and GDP
Uncounted
Transactions
Question
of Growth
Problem
of Averages
Pitfalls
of Comparison

7. Purchasing Power Parity
Estimate of GNP Per Capita at PPP (Selected Countries)
PPP Estimate of
GNP Per Capita
(U.S. = 100)
Selected
Country
GNP
Per Capita
United States
Switzerland
Japan
Canada
Russia
Mexico
Nigeria
India
26,980
40,630
39,640
19,380
2,240
3,320
260
340
26,980
25,860
22,110
21,130
4,480
6,400
1,220
1,400

8. The Expanding Triad 1997 figures N. American Free Trade Area
GNP
(billion)
Population
(million)
GNP
Per Capita
N. American Free Trade Area
$ 8,354
393
$ 21,248
U.S., Canada, Mexico
% of World:
30% 7%
Japan and the Tigers
$ 5,638
284
$ 19,831
Hong Kong, Japan, Malaysia, Singapore, South Korea, Taiwan, Thailand
% of World:
21% 5%
European Economic Area
$ 8,293
374
$ 22,134
EU: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, U.K.
EFTA: Iceland, Switzerland
% of World:
30% 7%

9. Big Emerging Markets: 1997 Market % of World Population % of World GNP
PPP
Market
GNP
(billion)
GNP
Per Capita
BEM (Total) $4,248 $1,
CEA (Total) 1,318 1,
China
Taiwan , <1
Hong Kong ,225 1 <1 <1
Brazil 590 3,
Korea, Rep ,
India
Mexico 318 3,
Russian Federation 301 2,
Argentina 297 8,
Turkey 184 2,
South Africa 134 3,
Indonesia
Poland 108 2,770 <1 1 1

10. Big Emerging Markets: 2010 Market % of World Population % of World GNP
PPP
Market
GNP
(billion)
GNP
Per Capita
BEM (Total) $7,673 $2,
CEA (Total) 2,724 1,
China 1,952 1,
Taiwan , <1
Hong Kong ,837 1 <1 <1
Korea ,
Brazil 877 4,
India
Mexico 545 4,
Argentina ,
Russian Federation 466 2,
Turkey 330 4,
Indonesia
South Africa 208 3,
Poland 201 4,

11. BOP (Balance of Payments)
1. Definition
Financial transaction statements between its residents and those of the rest of the world.
2. Double entry system
+ (inflow)
(outflow)
Qs: What are the sources of inflow and outflow of income?

12. BOP (cont’) 3. Current Account vs. Capital Account
all international export and imports of goods and services, private gifts and public aid transactions between countries
A record of all long-term and short-term capital flows
4. Trade Balance
The balance on current account

13. Ex: U.S. BOP, 1994-1997 (US$B) 1994 1995 1996 1997 A. Current Account
Trade Deficit
1994
1995
1996
1997
A. Current Account
1. Goods: Export FOB
504.45
577.69
613.89
681.27
2. Goods: Imports FOB
3. Balance on Goods
4. Services: Credit
199.25
217.80
236.71
256.06
5. Services: Debit
6. Balance on Goods and
Services
-97.34
-96.06
B. Capital Account
-.60
.10
.52
.16
Total A + B
Reserve