Economic Systems and Market Methods (ECONOMIC ANALYSIS (POVERTY (The…
Economic Systems and Market Methods
NEW MARKETS, NEW PERSPECTIVES
Countries Differ in Various Ways
Different levels of economic development
Economic and Political Changes Alter Market Circumstances
economic environments continually change
Changing economic policies reveal government ambitions
Connections, Change, and Consequences
Globalization connects countries
Choice in one has consequence in others.
Challenges of the Comeback
Choices of Citizens, Policymakers, and Institutions
INTERNATIONAL ECONOMIC ANALYSIS
214 discrete economic environments in the world today
he assessment of economic environments is often more conditional than universal because:
Data Overload Managers
Absolute right of property ownership, fully realized freedoms of movement for labor, capital, and goods, and an absolute absence of coercion or constraint of economic liberty beyond the extent necessary for citizens to protect and maintain liberty itself
Economic Freedom Index
estimates the extent to which a government constrains free choice and free enterprise for reasons that go beyond the need to protect property, liberty, safety, and efficiency.
THE VALUE OF ECONOMIC FREEDOM TODAY
Economic freedom helps explain a country’s development, performance, and potential.
TRENDS IN ECONOMIC FREEDOM
Fear of Freer Markets
The Market Test
TYPES OF ECONOMIC SYSTEMS
It is anchored in the doctrine of capitalism and the principle that private ownership confers inalienable property rights that legitimize the profits earned by one’s initiative, investment, and risk
Less Is More
The less visible the “hand” becomes due to government intervention, the more efficient the market.
The doctrine of laissez-faire endorses governmental noninterference in economic affairs
the government owns and controls resources, taking on the authority to decide what products to make, in what quantity, at what price, and in what way
A mixed economic system combines elements of
the market and command economic systems; both government and private enterprise influence production, consumption, investment, and savings.
ASSESSING ECONOMIC DEVELOPMENT,
PERFORMANCE, AND POTENTIAL
MEASURES OF ECONOMIC PERFORMANCE
Gross National Income (GNI
GNI is the broadest measure of economic activity for a country
Gross National Product (GNP)
GNP is the total value of
all final goods and services produced within a nation in a particular year.
Gross Domestic Product (GDP)
GDP is the total market
value of goods and services produced by workers and capital within a nation’s borders; it provides the truest measure of national economic activity.
Rate of Economic Growth
They do not measure the rate of change in an indicator. Interpreting present and forecasting future performance require pinpointing an economy’s growth rate.
Purchasing power disparity
measuring the relative
purchasing power of different
countries’ currencies for the
same basket of goods and
PERFORMANCE AND POTENTIAL: ALTERNATIVE INTERPRETATIONS
Sustainability and stability
Sustainability and stability perspectives hold that the objective of economic activity is to create an enabling environment for people to enjoy long, healthy, and happy lives.
Measures the increase in the cost of living.
The measurement of inflation highlights a common difficulty: what a country measures when estimating an economic variable.
If Not Inflation, Then Deflation
Deflation, a decrease in the general price level of goods and services, is often caused by a reduction in the supply of money or credit.
Unemployment measures the number of workers who want to work but do not have paid jobs.
Change in unemployment over time may reflect change in the demand for and supply of labor; it may also reflect changes in reporting practices.
the total of a government’s financial obligations, measures what the state borrows from its citizens, foreign organizations, foreign governments, and international institu- tions
Internal debt: Portion of the government debt that is denominated in the country’s own currency and held by domestic residents.
External debt: Debt owed to foreign creditors and denominated in foreign currency.
Income distribution estimates the proportion of the population that earns various levels of income.
Benefits and Costs
The Gini coefficient, the most commonly used measure
of inequality, indicates the extent to which income shares deviate from a perfectly equal distribution.
Poverty is the state of having little or no money, few or no material possessions, and limited access to education, health, and community.
Prevalence of Poverty
The Potential of the Poor
The Base of the Pyramid
is the largest, but poorest, socioeconomic group in the world.
The BOP is a system of recording all of a country’s economic transactions with the rest of the world.
ELABORATING ECONOMIC ANALYSIS WITH GLOBAL INDICES
Global Competitiveness Index (GCI)
World Competitiveness Index (WCI)
Global Innovation Index (GII)