Principles of economics openstax chapter32

College
Principles
ofPhysics
Economics
Chapter # Chapter
Chapter 32 Macroeconomic
PolicyTitle
Around the World
PowerPoint Image Slideshow


Job fairs and job centers are often available to help match people to jobs. This fair took place in the U.S.
(Hawaii), a high-income country with policies to keep unemployment levels in check. Unemployment is an
issue that has different causes in different countries, and is especially severe in the low- and middle-income
economies around the world.


Country Classification
Developing Countries: Nations in Africa, Asia (except Japan), and Latin America.
Developed Countries: Nations in North America (except Mexico) and Western Europe
plus Australia, Japan, and New Zealand.
Transitional Countries: Nations of the former Soviet Union and Eastern Europe that
are moving from socialism to capitalism.


COUNTRY CLASSIFICATIONS

Low income countries:
Per capita income up to $1,025
Middle income countries:
Per capita GDP $1,025 to $12,475

High income countries:
Per capita GDP more than $12,475


COUNTRY CLASSIFICATIONS

Low-income countries account for

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less than 1% of global income
18.5% of the world population

Middle-income countries account for

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31.1% of global income
69.5% of world population

High-income countries account for

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68.3% of global income
12% of the world’s population.

COUNTRY CLASSIFICATION


COUNTRY CLASSIFICATION

There is a clear imbalance in the GDP across the world. North America, Australia, and Western
Europe have the highest GDPs while large areas of the world have dramatically lower GDPs.


Growth policies of high income countries

Japan’s Prime Minister used fiscal and
monetary policies to stimulate his country’s
economy, which has worked in only the short
run.


Growth policies of high income countries

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Have fiscal policy focus on investment in human capital, social capital, and technology

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Eliminate federal deficit and reduce national debt

Keep inflation and unemployment low
Reform tax and spending structures
Keep independent central banks for steady growth of the money supply to support
economic growth

Reduce over-consumption of food and fossil fuel


Growth policies of middle income countries

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Maintain high saving rates
Have fiscal policy focus on investment in human capital, social capital, and technology
Continue to emphasize export promotion
Reform tax structure
Continue to adopt “appropriate” technology
Reduce government control and rely more on market system


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Alleviate poverty
Sustain economic growth and income equality
Provide civil liberty and freedom to choose
Invest in human capital (education, nutrition, health)
Control population growth (education, family planning)
Invest in social capital (housing, electricity, drinking water, schools, transportation,
communication)

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Provide more capital per worker hour
Adopt appropriate technology
Improve trust and honesty (eliminate corruption)
Improve the socio-economic status of women
Rely of democracy and market-orientation
Achieve peace and harmony (no need for big military)
Improve tax and spending structures
Have independent central banks

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GROWTH POLICIES OF LOW INCOME COUNTRIES


economic challenges Low income countries

In low-income countries, all income is often spent on necessities for living and cannot be accumulated or invested in
physical or human capital. The students in this photograph learn in an outside “classroom” void of not only technology,
but even chairs and desks.


Political challenges Low income countries

Low-income countries, like those in this chart, share common elements such as political
factionalism, infighting, and corruption.


Types of unemployment across countries

High income countries:

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Mostly cyclical due to recessions

Middle income countries

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Mostly structural due to technological change

Low income countries

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Both cyclical and structural
Lack of job creation policy


Appropriate technology

Modern technologies, such as solar-power and Wi-Fi, enable education to be delivered to students even in
remote parts of a country without electricity. These students in Ghana are sharing a laptop provided by a van
with solar-power.


13-16

Global Financial Crisis

Economic impacts on middle and low income countries

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Slow economic growth
Declining exports
Reduced foreign investment and foreign aid inflow
Declining stock markets and rising capital outflow
Inability to pay back debt


Global Financial Crisis

The economic conditions in Greece have deteriorated from the Great Recession such that the
government had to enact austerity measures, cutting wages and increasing taxes on its population.
Massive protests are but one byproduct.