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Understanding Economic Forces: Dimensions, Kinds, and Effects

Explore critical concepts such as GNI, PPP, and income distribution in the field of economics with Dr. Satyendra Singh of the University of Winnipeg. Gain insights into formal and informal economies, characteristics, and levels of economic development worldwide.

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Understanding Economic Forces: Dimensions, Kinds, and Effects

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  1. Welcome to class of Economic ForcesDr. Satyendra SinghProfessor, Marketing and International BusinessUniversity of WinnipegCanadas.singh@uwinnipeg.cahttp://abem.uwinnipeg.cawww.abem.ca/conference

  2. 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)

  3. 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

  4. Kinds of Economy… • Formal economy • Visible, Recorded, Audited • What % of GDP is owned by government • UK: 10%  4% • China: 80%  50% • Chie: 75%  25% • Mexico: 66%  33%

  5. Informal Economy (Street, undocumented…)

  6. Underground Economy • Illegal!, USA (10%)

  7. Why Privatize? • To get $ from firms • Increase firm profitability • Ideological reasons • Preserve jobs • … • Unfair because government firms • ↓price unfairly • ↓financing rate • ↑Get government contract • Expert assistance • ↓wages • ↑Has more resources

  8. Characteristics of Economy • Developed countries spend twice on • Food • Clothing • … • Developing countries spend twice on • Transportation • White goods • Healthcare • Wine/ cigarette

  9. Effects of Economy • Sales  willingness to purchase low • Wage rate • Labor supply • Union contract

  10. Wal*Mart Economy • $+450b sales • 4000 stores • 30 countries • Only 40 countries (out of 227) above Wal*Mart • Ghana $40b (ppp 80b) • Manitoba $50b

  11. Economic development Measurement (GNI/Capita), World Bank • Low Income (<$1000) • Mower middle income ($1000-$3000 • Upper middle income ($3000-$9000) • Higher income (>$10000) • Canada  $40,000 • India  $4,000 • China $9,000 • Ghana $3,000

  12. 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

  13. 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

  14. Purchasing Power Parity (PPP) If, 1 Lt. Milk US $1.00 1 Lt. Milk India 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

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