The central economic planning must be confronted by all nations.
Singapore, New Zealand, Ireland, and the United States allow the market mechanism to play a WHOM to produce it.
The nations shape economic outcomes.
The gives them more production possibilities than Dominica.
In each case, we want to see how the United States nations of the world use different mechanisms for deciding, and how America's answers WHAT, how, and FOR WHOM to produce.
The United States has less than 5 percent of the world's population and less than 12 percent of the world's arable land, yet it produces more than 20 percent of the world's output.
The World View shows the differences between the U.S. and other nations.
In 2005, the U.S. economy produced over $13 trillion in output.
China produced two-thirds of the total market value.
About a third of U.S. output is produced within a nation's borders, and Japan came in third.
Russia produced about as much as New York State.
The United States produces more output than the European Union.
The U.S. share of world output is remarkable because we do it with so few people.
We produce over 20% of the world's output.
China has a ratio of 20 percent of the world's population producing less than 14 percent of the world's output.
The United States is the largest economy in the world.
The output of Third World countries is less than that of the U.S.
Permission was granted by The International Bank for Reconstruction and Development.
The GDP is a basic measure of an economy's size.
The U.S. economy is larger than any other and accounts for 20% of the world's output of goods and services.
The total output is divided by the total population.
The per capita GDP does not tell the value of GDP divided by the total population.
If all output were divided evenly among the population, per capita GDP would be an indicator of how much output the average person would get.
The United States' per capita GDP in 2005 was five times larger than the world average.
The World View gives a global perspective on how rich America is.
Some of the country-specific comparisons are startling.
People in other countries don't come close to that low standard.
According to the World Bank, almost half of the people on Earth have incomes of less than $2 a day.
America's prosperity is easy to understand because the rest of the world envies it.
The GDP gap between the United States and the world's poor nations keeps growing.
The American standard of living is higher than the world average.
A tiny fraction of U.S. standards.
The per capita GDP is a measure of output.
America's high GDP per capita means more access to goods and services than people in other nations.
The world's poor are not so fortunate.
Data on the output of different happening in Haiti can be found in Table 2.1.
The Haitian population kept growing.
Nearly two-thirds of Haiti's population were undernourished because of the low per capita GDP.
The economic situation in Zimbabwe deteriorated even faster as shown in Table 2.1.
GDP growth in recent years wasn't fast enough to raise living standards.
They fell further behind America's level of prosperity.
Farming, manufactured goods, and mining made up about two-thirds of U.S. output a century ago.
Permission was granted by the International Bank for Reconstruction and Development.
Data on the mix of output in differ and telecommunications equipment has grown tremendously, despite the fact that some industries such as iron and steel have shrunk.
The manufacturing output has increased fourfold since 1950.
The transformation of the United States into a service economy is a reflection of our high incomes.
50 percent of Ethiopia's output comes from the farm sector, where the most urgent concern is to keep people from starving.
Poor people don't have enough money to buy dental services, vacations, or even an education so the mix of output in poor countries is weighted toward goods.
The U.S. output came from farms.
America will become more of a service economy in the future.
This generalization doesn't give much information about what America produces.
By examining the uses to which our output is put, we can develop a clearer picture of our answer to the WHAT question.
Consumer goods and services make up most of America's output.
Breakfast cereals, movie rentals, college education, and anything and everything households buy for their own use are included in this output.
Consumption goods and services make up over two-thirds of all output.
Investment goods are not the same as output.
Expenditures were spent on the business sector.
The United States devotes 17 percent of output to investment.
Poor countries need capital investment.
They can't afford to cut back on consumer goods because of their low incomes.
When Stalin wanted to make Russia an industrial power, he cut output of consumer goods and forced Russian households to scrounge up meager supplies of food, clothing, and even shelter for decades.
Most poor nations rely on foreign aid to finance needed investment.
They are at risk of stagnation or even a decline of living standards without more investment.
Government services are the third type of output.
Federal, state, and local governments buy resources to police the streets, teach classes, write laws, and build highways.
The government sector's resources are not available for consumption or investment.
The production of government services absorbs 20% of the total US output.
Social Security benefits, welfare checks, food goods or services are exchanged, goods or ser vices are exchanged, stamps, and unemployment benefits are all transfer payments.
State and local governments make up for what they lack in size.
In addition to the 50 state governments, there are over 3000 counties, 18,000 cities, 17,000 townships, 21,000 school districts, and over 20,000 special districts.
The government entities that build roads, provide schools, police, and firefighters, administer hospitals, and provide social services are these.
Goods and ser vices are not used at home.
International trade is not a one-way street.
Since GDP only includes goods and services produced within a nation's borders, imports wouldn't affect it.
Consumption, investment, and government purchases include imports and domestically produced goods.
Table 2.2 summarizes America's trade flows.
The value of goods, farm machinery, tobacco, food, and another $414 billion of services are exported.
10 percent of imports were exported.
Cars, computers, and tomatoes are examples of domestically produced replacements for imported goods.
International trade allows a nation to produce goods that have a cost advantage and then trade them for imported goods that have a cost disadvantage.
Smaller countries are in need of specialized services.
A small economy can't produce all the goods and services consumers want.
They can sell their goods in world markets.
Net exports are negative when imports exceed NET EXPORTS.
It uses its export earnings to buy things it can't produce on its own.
China imports airplanes, telecommunications equipment, and oil rigs when it exports textiles, dolls, and linens that are cheap.
U.S. consumers get cheaper consumer goods while China gets needed investment goods.
There are some clues into how America produces.
We produce more output than China, India, Indonesia, and Brazil.
The United States has invested a lot in human capital.
In 1940, 20 young Americans graduated from college, but only 1 out of 20 are employed today.
The high school graduation rate jumped from 38 percent to 85 percent in the same time period.
A fifth of the world's population are unable to read a book or write their own names, according to the United Nations.
Without functional literacy, such workers are doomed to low-productivity jobs.
They are not likely to steal jobs from America's educated and trained workforce.
Poorer countries are striking.
A Chinese farmer works with his hands and crude processes that use a high ratio of capital to labor inputs.
85% of Americans graduate from high school.
Few workers attend high school in poor countries.
Half of the world's poor workers are uneducated.
Permission was granted by the International Bank for Reconstruction and Development.
The high productivity of the American economy is explained by the quality of its labor resources.
Less developed countries give less education and training to their workers.
T H E E C O N O M I C H A L L E N G E implements, whereas a U.S. farmer works with computers, automated irrigation systems, and mechanized equipment.
The computer networks and telecommunications systems used in the U.S. are not used by Russian business managers.
Reliable sources of power are hard to come by in Haiti and Ethiopia.
You tend to get more output when you put educated workers together with sophisticated capital equipment.
The average worker produces a certain amount of output.
It's very simple.
The huge output of the United States is explained by their quality as well as by a wealth of resources.
The high productivity of the U.S. economy can be attributed to the use of highly educated workers.
Some industries expand and others contract.
Many firms 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- 888-609- Land, labor, capital, and entrepreneurship move from one industry to another in response to changing demands and technology.
Federal Express, Compaq Computer, and other companies didn't exist in 1975.
Wal-mart was a small store.
Starbucks was selling coffee on Seattle street corners, and the people who started the companies weren't even born.
Over a million people are employed by these companies.
These workers came from other firms that weren't growing as fast.
Advances in technology keep shifting resources from one industry to another.
Microaturization of electronic circuits is just one of the ways in which technology can be improved.
The productivity of the workforce can be increased by either phenomenon.
Technology can increase output with existing resources.
Trade and outsourcing.
Telephone workers in India or Grenada can answer calls from the U.S. companies.
Capital equipment and advanced technology make American farmers and workers more productive than workers in poor nations.
In India, programmers can work online to write computer code, develop software, or perform accounting chores for U.S. corporations.
Outsourced work is seen as a threat to U.S. jobs, but it is actually another source of increased U.S. output.
U.S. workers can focus on higher value jobs by outsourcing routine tasks to foreign workers.
More systems design and less routine programming are done by U.S. computer engineers.
U.S. accountants do more cost analysis.
The economy gains even though some U.S. workers suffer temporary job losses.
The amount of economic freedom varies a lot among the nations of the world.
There is a positive relationship between economic freedom and economic growth documented by the Heritage Foundation.
Entrepreneurs are more likely to design and produce better mousetraps if they are free from regulation or high taxes.
There is little incentive to design better products when the government owns the factors of production, imposes high taxes, or tightly regulates output.
Rejecting all government intervention is not equivalent to recognizing the productive value of economic freedom.
The abolition of government is not advocated by most people.
Private businesses can operate if the government establishes a framework.
A legal framework.
The rules of the game are one of the most basic functions of government.
Maybe a person's word was enough to guarantee delivery or payment in the past.
Businesses nowadays rely more on written contracts.
The government establishes rules for contracts and enforces them.
Few companies would be willing to ship goods without prepayment if there were no contractual rights.
If government copyright laws didn't forbid unauthorized copying, the incentive to write textbooks would disappear.
The government lays the foundation for market transactions by establishing ownership rights, contract rights, and other rules of the game.
1.32% affects a nation's ability to grow.
Permission was used.
The environment is being protected.
The government intervenes in the market to protect the environment.
The interests of a buyer and seller are protected by the legal contract system.
There are many examples of how unregulated production may harm third parties.
Steel mills around Pittsburgh used to block out the sun with clouds of sulfurous gases.
Local residents were hurt every time they breathed.
Side effects would be common in the absence of government intervention.
The environment is affected.
Market activity affects our collective well-being because of the spillover costs imposed on fits.
The external costs can be reduced by a third party.
It's important to protect consumers.
The government protects the interests of consumers.
A firm that is too powerful.
Consumers would end up with the short end of the stick, paying too much for too little.
To protect consumers from monopoly exploitation, the government tries to prevent individual firms from dominating specific markets.
Mergers or acquisitions are not allowed because they would threaten competition.
Pricing practices, advertising claims, and other behavior that might put consumers at an unfair disadvantage in product markets are regulated by the U.S. Department of Justice and the Federal Trade Commission.
Many products are regulated by the government.
Consumers don't have the expertise to assess the safety of various medicines.
They might not get a second chance if they rely on trial and error to determine drug safety.
The government requires rigorous testing of new drugs and other products.
It's important to protect labor.
How labor resources are used in the production process is regulated by the government.
Children are often forced to start working very early in life in poor nations.
They don't have the chance to go to school or stay healthy.
40 percent of children under the age of 14 in Africa work to survive.
There are child labor laws in the United States.
Minimum wages, fringe benefits, and overtime provisions are set by government regulations.
Government interventions change the way resources are used.
The market might not choose the best way of producing goods and services according to the interventions.
Government regulation of how goods are produced always makes us better off.
Raising product prices, and limiting consumer choices may be caused by excessive regulation.
Striking the right balance between market reliance and government regulation is important.
America uses high-quality labor and capital resources to produce a lot of output.
Averages rounded to thousands of dollars are from the U.S. Department of Commerce, Bureau of the Census.
The amount of goods and services one gets depends on their income.
People who get the most money get the most things.
It is possible to explain why millionaires live in mansions and homeless people seek shelter from the U.S. Bureau of the Census abandoned cars.
Karl Marx's denunciation of capitalism was fueled by this kind of inequality.
The distribution of income in the United States is shown in Figure 2.5.
A household needed at least $92,000 of income to be in the top quintile in 2005.
The lowest quintile had households with incomes under $19,000.
The most striking feature of Figure 2.5 is how large a slice of the income pie rich people by income.
Half of U.S. income is given to the top 20 percent of households.
The richest 20 percent of households in the U.S. get less than 4 percent of their income.
Income inequalities are more pronounced in the poorer countries.
45 percent of the nation's income goes to the richest tenth of families.
The World Bank defines "severe poverty" as an income of less than $2 a day for 75 percent of Sierra Leone's population.
There would be even greater inequality if there were comparisons across countries.
Third World GDP per capita is much lower than the U.S. levels.
The market distributes income according to resources an individual has and how well they are used.
Some redistribution via government intervention may be desired if the inequalities are too great.
As a country develops, inequality tends to diminish.
40 to 50 percent of all income is given to the cally by the International Bank for Reconstruction and Development.
In the World Bank.
The distribution of income is reflected by the FOR WHOM question.
In most Third World countries, inequalities loom larger than in the U.S.
Market forces and government intervention have shaped the answers to the basic questions.
The answers are not yet fully satisfactory.
Millions of Americans are struggling to make ends meet.
A fifth of the world's population is chronically malnourished, and over a quarter of the population is uneducated.
The World Bank thinks we can do better.
It has set ambitious goals for the economy.
The World Bank set goals for world development in the Millennium Declaration.
Cut the number of people without access to water in half.
Billions of people would be helped by achieving these goals.
People in rich nations want higher living standards in the economy.
People in poor nations dream of more comforts.
We want more consumer goods, better schools, improved health care, a cleaner environment, and more economic security.
Tomorrow's economy could be transformed by a magic wand.
We are saddled with economic reality.
All nations have limited resources.
To get to a better place tomorrow, we need to put those resources to better use.
We don't have to fully embrace laissez faire.
Government intervention has the potential to accelerate economic growth, reduce poverty, raise health and education standards, and protect the environment.
The balance of market and government forces is a challenge for the economy.
As the text proceeds and revisits the challenge of global poverty in Chapter 37, we will explore this quest in more detail.
The answers to historical ratios and high incomes in questions vary greatly across nations.
The United States has differences.
Poor nations produce much higher pro reflect differing production possibilities, choice mecha portions of food and manufactured goods.
The basic measure of services is GDP.
Investment goods make up 17 percent of the economy's output.
More than one percent of the United States' output is bought by the government.
Incomes are distributed more evenly among households than the world average.
The high level of U.S. per capita GDP is due to the fact that workers receive over 10 times more income than low-income workers.
Technology, training, and management all contribute to poor nations.
The mix of output, production methods, and income economic freedom is changing.
Over 75% of U.S. output consists of services, on the continuing interplay of market signals.
This is a reversal of government policy.
Why do people think the United States needs 7?
The government should try to equalize incomes.
Since 1900, the US has raised taxes on the rich and given more money to the people.
There are numerical and graphing problems in the Student Problem Set at the back of the book.