12/6/ 2010 Economics Notes

How do we compare countries??

As we have talked about before, even countries that are in the same region or area of the world can be very different from one another. (Think about Argentina and Chile and what they can grow due to their geography…)

In order to be able to compare how people in different countries live, we have a number of ways to “quantify” or measure a country’s “standard of living”

Gross Domestic Product (GDP)

• GDP is a measurement of the strength of a country’s economy. It tells us what the total value is of all goods and services produced within a country.

Goods and Services?? Huh?

• A good is a product (cup of coffee, a TV, a car, your pencil, shoes, groceries, etc)

• A service is something you pay someone to do (cut your hair, fix your roof, walk your dog, clean your teeth, check if you have strep, etc)

To be included in the GDP these goods and services must be produced in the United States

In the United States….

• Our GDP is $14,256,300,000,000!

That is 14 TRILLION DOLLARS

Gross Domestic Product per capita

• Gross Domestic Product per capita divides this total value by the total population of the country, giving us the average value of goods and services each person in that country produces.

For Example…

In the United States, our GDP is $14,256,300,000,000 ($14.3 trillion!)

There are 307,007,000 people living in our country

So the GDP per capita is $46, 436 ($14 trillion divided by 307 million)

In Haiti…

The GDP is $6,692,678,034

The Population is 10,032,619

Therefore the GDP per capita is $667!

How much does this tell us? Which country is richer?

The United States Haiti

GDP: $14,256,300,000,000 GDP: $6,692,678,034

Population: 307,007,000 Population: 10,032,619

GDP/Capita: $46, 436 GDP/Capita: $667

What does that mean?

• For the most part, you can assume that countries with a high GDP also have a high “standard of living”

• However, there is another measurement that tells us more about the quality of people’s life in a certain country…

Human Development Index

• The Human Development Index (HDI) is a statistic developed by the United Nations to measure the overall quality of life. The HDI looks at the average health, living standards and education in that country. It is expressed as a decimal number between O (lowest) and 1 (highest).

What goes into the HDI?

From: http://hdr.undp.org/en/statistics/hdi/

For Example…

• The Human Development Index in the United States is 0.956 (The US is a wealthy country, many people go to school and live to an old age)

• The HDI in Peru is 0.806 (Peru is not as rich, fewer people go to school and live to an old age)

• The HDI in El Salvador is 0.747

Can you find?

• Using the Jr Scholastic World Affairs magazine, can you find and rank the TOP THREE countries in terms of GDP/capita and the BOTTOM THREE countries in terms of GDP/capita in North American and South America??

• Can you do the same for the HDI? (Top 3 and bottom 3 in terms of HDI in North and South America?)