Development and economy

4167 mots 17 pages
FIRST CHAPTER: ECONOMIC GROWTH, AN INTRODUCTION

What’s the goal of economic agents?
3types of agents: households, firms and governments.
For households: Higher economic growth leads to higher wages (if correctly distributed) which leads to higher consumption. So economic growth for households is a way to increase their consumption.
Firms aim at doing high profits, and higher economic growth leads to higher profits.
For the government, a high growth helps to reduce or cut down fiscal debt because it allows government to increase taxes or to reduce expenses.

I/ INTRODUCTION
Usually growth is seen as the solution for our problems: for a developed country it will allow to reduce/lower unemployment or to balance budget. For developing countries it may allow to reduce poverty and increase the welfare (depends on consumption).
Usually growth is a cumulative process, growth calls for growth.
There are 2 main measures for growth : * Real GDP : allows to eliminate the price effect ( inflation) on growth
Real GDP = Nominal GDP – Prices because Real growth rate = Nominal growth rate – Inflation * GDP/ capita : used to see the real wealth of a country per inhabitant bc the GDP of China is far more higher than the GDP of Luxembourg but the GDP/capital is larger in Luxembourg than in China allows to eradicate the size effect.

A MADDISON, studied many indicators of growth and he found that real economic growth in Africa was about 2.74% / year whereas the population growth (n) was about 2.73% : the real growth/capita was almost 0%. So you have to compare the progression of growth to the pace of progression of the population.

1) The main phases of World Economic Growth ( WEG)
“During the last thousand years population was multiplied by 13, GDP/capita by 22 and GDP by 300.”
Why 13x22 isn’t equal to 300, whereas it should be ? Because an approximation by log is used. When analyzing macroeconomic figures, you should be very careful because

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