ECO 102Macroeconomics
Why are all taxi drivers in Riyadhfrom some place else?
GDP Per
Capita
Saudi Arabia $25,000
India $1,500Pakistan $1,261
Bangladesh $800
16.7 times more 19.8 times more 31.2 times more
Damman No. 7March 3,1938
Dhahran
Standard OilRockefeller
World’s most valuable company
Energy Density MJ/kg
24 44 55 80,620,000
Why are some countries rich
and others poor?
Energy?
Time Commitment
Class 3 Hours
Homework 6 HoursTotal 9
Hours
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Most people
Most of the time
Economics is a Soft Science
What is Wealth?
What People Want
Get wealthy by making
others happy
Ideas occur in minds
not places
Hockey Stick Trends
$3
Angus Maddison
Income Per
Person Per Day
20121 AD
$100
20121 AD
$3
$100
$30World 10x
Northern Europe North America
33x
1820
Angus Maddison
“The Millennium–Poor Until 1820”
Income Per
Person Per Day
GDPGross Domestic Product
The market value of all final goods and services produced in a country in
a given time
GDPHow much stuff a
country makes
GDP Per CapitaGDP Per Person
Average GDP
GDP $750 billion
Population 30 million
GDP Per Capita $25,000
Market ValueWhat something
would sell for
Market ValueOne Apple
plusOne Orange
= Three Riyals
AllEverything except...
Stuff you don’t sell
FinalIntermediate
Final
Final
Intermediate
Goods and Services
ProducedNew Stuff
Does not include the sale of used goods
Only production within Saudi
Arabia
In a given period of timeYear Y/Y
Quarter Q/QAnnualized: Q x 4
PercentageChange
new number - old numberold number
This Year - Last YearLast Year
This Year = 75Last Year = 60Percentage Change?
75 - 6060
1560
.25 or 25%
How do you calculate
GDP?
GDP =C = ConsumptionI = InvestmentG = GovernmentX = ExportsM = Imports
GDP =C + I + G + (X - M)
ConsumptionSpending by
households on goods and services, except new housing
InvestmentSpending on capital
equipment, inventories, and structures, including new
housing
GovernmentSpending on goods and services from
local, state, and federal governments.
Net ExportsExports minus
imports
Net ExportsForeigners buying
exports minus domestic residents
buying foreign goods
What is GDP?C = 105I = 40G = 25X = 30M = 20
What is GDP?C = 105I = 40G = 25E = 30I = 20
GDP= C + I + G + (X - M)= 105 + 40 + 25 +(30-20)= 105 + 40 + 25 +10= 180