Transcript ib-economic-labor

Welcome to class of
Economic Forces
by
Dr. Satyendra Singh
University of Winnipeg
Canada
Dimensions of the Economy…
 Important Economic Indicators
 Gross National Income (GNI)
 GNI/capita
 Purchasing Power Parity
 Income Distribution
 Private consumption
 Unit labor costs
 Exchange rates
 Inflation rates
 Interest rates
 Balance of payment (BOP)
Dimensions of the Economy
• Gross National Income (GNI)
– The measure of the income generated by a
nation’s residents from international and domestic
activity
– Preferred over GDP
• GNI/Capita
– Used to compare countries with respect to the
well-being of their citizens and to assess market or
investment potential
Kinds of Economy…
• Formal economy
– Visible, Recorded, Audited
– What % of GDP is owned by government
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UK: 10%  4%
China: 80%  50%
Chie: 75%  25%
Mexico: 66%  33%
Informal Economy (Street, undocumented…)
Underground Economy
– Illegal!, USA (10%)
Why Privatize?
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To get $ from firms
Increase firm profitability
Ideological reasons
Preserve jobs
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• Unfair because government firms
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↓ price unfairly
↓ financing rate
↑Get government contract
Expert assistance
↓ wages
↑ Has more resources
Characteristics of Economy
• Developed countries spend twice on
– Food
– Clothing
–…
• Developing countries spend twice on
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Transportation
White goods
Healthcare
Wine/ cigarette
Effects of Economy
• Sales  willingness to purchase low
• Wage rate
• Labor supply
• Union contract
Wal*Mart Economy
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$+450b sales
4000 stores
30 countries
Only 40 countries (out of 227) above Wal*Mart
• Ghana $40b (ppp 80b)
• Manitoba $50b
Economic development Measurement
(GNI/Capita), World Bank
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Low Income (<$1000)
Mower middle income ($1000-$3000
Upper middle income ($3000-$9000)
Higher income (>$10000)
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Canada  $40,000
India  $4,000
China $9,000
Ghana $3,000
Levels of Economic Development
• Developed
– Nations that are the most technically developed
• Newly industrialized economies (NIEs)
– The fast-growing upper MIG and HIG economies such
as Taiwan, Hong Kong, and Singapore
• Newly industrializing countries (NICs)
– Brazil, Mexico, Malaysia, Chile and Thailand
• Developing
– Nations that are less technically developed
• Emerging Markets
– Transformation from controlled to market economy
Purchasing Power Parity (PPP)…
– The number of units of a currency required to buy
the same amount of goods and services in a
domestic market that $1.00 would buy in the U.S.
– Helps to make comparisons possible across
economies
CIA Fact Book
Purchasing Power Parity (PPP)
If,
1 Lt. Milk
1 Lt. Milk
US
India
$1.00
Rs. 20.00
Then, PPP: US $1 = Rs. 20
Reality: US $1 = Rs. 40
ie Rs. is 50% undervalued – artificially?!
However, PPP is based on consumer expenditure on
basket of essential goods