GROWTH Part 4 economic
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GROWTHPart 4
economic
Group 1 What is GDP and how do you calculate it?
Group 2 Why is economic growth desirable?
Group 3 How is economic growth created?
Group 4 How does economic freedom impact growth?
Create a large-scale illustration / diagram that answers the following questions:
GDP: $3.593 tr i l l ion GDP per capita : $39,500
GermanyGDP: $2.49 tr i l l ion
GDP per capita : $37,300
United Kingdom
GDP: $47.34 bi l l ion GDP per capita : $1,300
GDP: $18.56 bi l l ion GDP per capita : $400
Democratic Republic of Congo
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Is this statement TRUE or FALSE?
It is doubtful that the low-income countries of Sub-Saharan Africa
will ever have GDPs equal to the value of those of Western
European countries.
ECONOMIC CONVERGENCE:When low and middle income countries
(“developing”) have higher growth rates than high income countries (“developed”). Thus, over time the low income countries will “converge” with the high
income countries by having the same per capita GDP.
In other words, once nations begin industrializing, they will eventually reach a common level of prosperity.
ECONOMIC CONVERGENCE:When countries are in the process of
industrializing, they have very high growth rates. Once industrialization slows, growth rates
lower to an average of 2% per year.
ECONOMIC CONVERGENCE:Why is it happening?
Pre-existing technology can be transplanted in developing countries: they do not need to spend years developing it themselves.
ECONOMIC CONVERGENCE:Why is it happening?
There are more things that can be produced, built, and improved in developing countries. They have more room to grow than more highly developed nations. We’ve got lots of
opportunity for improvement here!
ECONOMIC CONVERGENCE:Why is it happening?
Once people begin to enjoy the benefits of a higher standard of living, they are more likely
to support free-market policies and institutions that will create further economic growth.
The argument that convergence is not likely or inevitable:
The growth of highly developed nations does not always slow down. Improvements in technology can create high growth rates even after industrialization has taken place.
The argument that convergence is not likely or inevitable:
It’s not always easy for developing countries to adopt existing technology. The government policies and
political climate of the country must be supportive of the new technology and economic changes.
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CONVERGENCE CASE STUDY:1. Choose a country with a per capita GDP of $3,000 or less. 2. Identify factors that indicate why the wealth of this country is
relatively low. 3. How is this country currently trying to create economic
growth? What things are they doing? 4. What are some additional things that this country could do to
create economic growth? 5. What challenges might this country face in trying to create
more economic growth? 6. Do you think this country will be able to economically
“converge” with countries like the United States in the future? Explain why or why not.
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