Review & Preview:Review & Preview:EconomicsEconomics

12/3/1412/3/14

Review…Review… What is literacy rate?What is literacy rate?

Answer…Answer… Literacy Rate = The number Literacy Rate = The number

of people in a country age of people in a country age 15 years and older who can 15 years and older who can read and write.read and write.

Review…Review… What is standard of living?What is standard of living?

Answer…Answer… Standard of Living = The level of Standard of Living = The level of

wealth, comfort, material goods, wealth, comfort, material goods, and necessities available to a and necessities available to a population in a certain area.population in a certain area.

Preview…Preview… What is Human Capital?What is Human Capital? What are Capital Goods?What are Capital Goods? What is Entrepreneurship?What is Entrepreneurship? What is gross domestic product?What is gross domestic product?

Factors that Lead to Factors that Lead to Economic Growth Economic Growth

Economic GrowthEconomic Growth There are 4 factors that influence There are 4 factors that influence

economic growth within a country:economic growth within a country: Investment in Human CapitalInvestment in Human Capital Investment in Capital GoodsInvestment in Capital Goods Natural Resources availableNatural Resources available EntrepreneurshipEntrepreneurship

Economic GrowthEconomic Growth The presence or absence of The presence or absence of

those 4 factors determine the those 4 factors determine the country’s Gross Domestic country’s Gross Domestic Product for the yearProduct for the year

What is Human Capital?What is Human Capital?

All of the skills, talents, All of the skills, talents, education, and abilities that education, and abilities that human workers possess---and human workers possess---and the value that they bring to the the value that they bring to the marketplacemarketplace

What is Human Capital?What is Human Capital?

Examples of Human Capital: Examples of Human Capital: computer/reading/writing/math computer/reading/writing/math skills, talents in skills, talents in music/sports/acting, ability to music/sports/acting, ability to follow directions, ability to serve as follow directions, ability to serve as group leader & cooperate with group leader & cooperate with group membersgroup members

What is Human Capital?What is Human Capital?

A country’s Literacy Rate A country’s Literacy Rate impacts Human Capitalimpacts Human Capital

Literacy Rate - The percent of the Literacy Rate - The percent of the population within a country over population within a country over 15 years old that can read/write15 years old that can read/write

How does Human Capital How does Human Capital Influence Economic Growth?Influence Economic Growth?

Nations that invest in the health, Nations that invest in the health, education, & training of their people education, & training of their people will have a more valuable workforce will have a more valuable workforce that produces more goods & servicesthat produces more goods & services

How does Human Capital How does Human Capital Influence Economic Growth?Influence Economic Growth?

People that have training are more People that have training are more likely to contribute to technological likely to contribute to technological advances, which leads to finding advances, which leads to finding better uses of natural resources & better uses of natural resources & producing more goodsproducing more goods

What are Capital Goods?What are Capital Goods?

All of the goods that are All of the goods that are produced in the country and then produced in the country and then used to make other goods & used to make other goods & servicesservices

What are Capital Goods?What are Capital Goods? Examples: tools, equipment, Examples: tools, equipment,

factories, technology, computers, factories, technology, computers, lumber, machinery, etc.lumber, machinery, etc.

What are some capital goods used in What are some capital goods used in our classroom?our classroom?

How do Capital Goods influence How do Capital Goods influence Economic Growth?Economic Growth?

The more Capital Goods a country has = The more Capital Goods a country has = the more goods & services they are able the more goods & services they are able to produceto produce

The US has superior The US has superior capital goods.capital goods.

What are Natural Resources?What are Natural Resources?

All of the things found in or on the All of the things found in or on the earth; “gifts of nature”earth; “gifts of nature”

Examples: rivers, minerals, Examples: rivers, minerals, animals, plants, oil, timber, etc.animals, plants, oil, timber, etc.

How do Natural Resources How do Natural Resources Influence Economic Growth?Influence Economic Growth?

Countries that have a lot of natural Countries that have a lot of natural resources are able to use them to resources are able to use them to produce goods & services cheaper produce goods & services cheaper than a country that has to import than a country that has to import natural resourcesnatural resources

How do Natural Resources How do Natural Resources Influence Economic Growth?Influence Economic Growth?

Russia is rich in natural resources, Russia is rich in natural resources, but because of the harsh climate & but because of the harsh climate & size, it’s hard for Russians to get to size, it’s hard for Russians to get to them.them.

What is Entrepreneurship?What is Entrepreneurship? It can be several things:It can be several things:

Starting your own businessStarting your own business Inventing something newInventing something new Changing the way something was Changing the way something was

previously done so that it works previously done so that it works betterbetter

What is Entrepreneurship?What is Entrepreneurship?

Can you name any entrepreneurs Can you name any entrepreneurs that you’ve heard of in the past?that you’ve heard of in the past?

How does Entrepreneurship How does Entrepreneurship Influence Economic Growth?Influence Economic Growth?

Encourages people to take risks, and Encourages people to take risks, and in doing so, they’ve created better in doing so, they’ve created better healthcare, education, & welfare healthcare, education, & welfare programsprograms

How does Entrepreneurship How does Entrepreneurship Influence Economic Growth?Influence Economic Growth?

Entrepreneurship creates jobs and Entrepreneurship creates jobs and lessens unemploymentlessens unemployment

The more entrepreneurs a country The more entrepreneurs a country has, the higher the country’s GDP has, the higher the country’s GDP will bewill be

How is Economic Growth How is Economic Growth Measured?Measured?

Economic growth in a country is Economic growth in a country is measured by the country’s Gross measured by the country’s Gross Domestic Product (GDP) in one yearDomestic Product (GDP) in one year

Gross Domestic ProductGross Domestic Product

GDP = the total amount of final goods GDP = the total amount of final goods and services produced in one year and services produced in one year within a countrywithin a country

Gross Domestic ProductGross Domestic Product GDP only measures what has been GDP only measures what has been

produced within the country--this doesn’t produced within the country--this doesn’t include products that are imported.include products that are imported.

It is much better for the economy of a It is much better for the economy of a country to produce its own goods and country to produce its own goods and services (this increases the country’s services (this increases the country’s GDP).GDP).

Gross Domestic ProductGross Domestic Product

Measuring the GDP each year can:Measuring the GDP each year can: Compare one country’s economy to Compare one country’s economy to

anotheranother Check a country’s economic Check a country’s economic

progress over timeprogress over time Show if the economy is Show if the economy is

growing or not growing or not

Standard of LivingStandard of Living

In order for a country to have an In order for a country to have an increasing GDP, it must invest in increasing GDP, it must invest in human capital through education & human capital through education & training, and it must produce goods training, and it must produce goods that have value to be sold within the that have value to be sold within the country or exported.country or exported.

Standard of LivingStandard of Living

The higher a country’s GDP = a The higher a country’s GDP = a better standard of living for the better standard of living for the people within the countrypeople within the country