13. Measuring the Economy: GDP

GDP refers to the total market value of all the final goods and services produced and sold in within the borders of a specific geographical area (such as within the borders of a country) within a given period - normally a year. Why is it calculated? Often students say it is to enable governments to manage the economy. Governments don't manage economies - they are pretty powerless to do so and it is not their function to do so. At best they can only create the climate in which individuals and firms can do business and set up some rules as how production and trade can take place - usually modern governments do this by removing the obstacles in the way of production and trade. These conditions relate to the monetary and fiscal frameworks of a country. Countries that have less government involvement in the economy have higer GDP growth rates than countries with larger government involvement (EFW Report, 2013). A low tax regime would for example attract more Foreign Direct Investment than contries with high taxes. GDP is measured through various methods that attempt to measure economic activity during the different stages of the circular flow of income and expenditure. One point of measurement is when expenditure takes place. So what is measured is all the expenditure by the main actors on final goods - this includes the consumption expenditure by individuals, expenditure by governments and net purchases by foreigners (less imports). C.M. Heydenrych Johannesburg 2013.

12. Inflation - Cost push

One reason given for the phenomenon of inflation is so-called cost-push inflation. In a popular student resource (http://www.tutor2u.net/blog/files/Revision_Causes_of_Inflation.pdf) the following is given as one part of this phenomenon: 1. Component costs: e.g. an increase in the prices of raw materials and components. This might be because of a rise in global commodity prices such as oil, gas copper and agricultural products used in food processing – a good recent example is the surge in the world price of wheat. Companies would ostensibly then respond to rising costs, by increasing their prices of this product to protect profit margins. this is then LABLELLED as Cost-push inflation. Somewhere someone got it wrong - because if businesses increase their prices the consumers will have to pay more for that product. Given a fixed amount of disposable income they will have less available to pay for other products. The demand for the other products will fall and so will the price level for the other products (put in a different way the demand for all other products will shift to the left and prices will fall commensurate to the price rise of this product). The aggregate siuation will however stay exactly the same without ANY rise in price that could be linked to inflation. It is only when there is a similtaneous rise in the money supply that there could be a general rise in the aggregate price level - inflation (cost push) can only be explained in an environment of an increase in money supply. The conclusion that I come to is that cost push is cancelled out by the move to the left in Demand curve in the demand-pull explanation of inflation in a situation where there is a stable money supply. AGGREGATE SUPPLY AND DEMAND STAYS THE SAME IRRESPECTIVE OF THE PRICE LEVELS OF INDIVIDUAL components of the aggregates in a situation of a stable (fixed) money supply. If anyone has a different view, or if I have missed out on something, please let me know.

11. AN OVERVIEW OF A BASIC ECONOMICS COURSE.

Previously I said the I will "make you an Economist" - no, you will be making yourself one. I will just provide the framework in which you will develop your thinking.

The framework of the framework will look something like this:

1. WHAT ECONOMICS IS

THE ECONOMIC PROBLEM

DIFFERENT VIEWS ON THE SUBJECT

2. MICROECONOMICS AND MACROECONOMICS

FLOWS IN A MIXED ECONOMY

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>Video (Ishmael) https://www.youtube.com/watch?v=e0nBs7L8CrE

3. PRICE THEORY

4. PERFECT MARKETS

5. SUPPLY AND DEMAND & HOW PRICES ARE FORMED

6. PRICE ELASTICITY

7. THE SUPPLY CURVE OF THE FIRM

To fully understand the supply curve of the firm one needs to understand MARGINAL COST. Here is a short video that explains the concept: https://www.youtube.com/watch?v=7t8gdc3YogM 8. MONOPOLY AND IMPERFECT COMPETITION

9. MACRO-ECONOMIC ISSUES

10. MEASURING THE ECONOMY - GDP

11. INFLATION

12. UNEMPLOYMENT

13. ECONOMIC GROWTH

14. Capita Selecta xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxOpportunity Cost: The value that we give up in order obtain another value. For example: the time that you spend learning economics cannot be used to watch TV (your TV time has to be sacrificed to spend learning Economics)

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> http://study.com/academy/lesson/opportunity-cost-definition-real-world-examples.html 3.3 Briefly explain ANY THREE (3) determinants of the price elasticity of demand.

10. How to become an economist.

Over the next 1000 days I will make you an economist - just send me an email - to proplib at gmail dot com! Use the words "Make me an Economist" in the subject line.

On a more or less daily basis I will be giving you the theoretical underpinnings of what you would require to be "an economist" so if you are a reporter at a newspaper, work in an economics related unit in an organisation... join me and see where it takes us.- I intend taking you through at least what would be equivalent to the three year's of study in Economics in a B-degree over the next 1000 days.

Send me an email - CU tomorrow. This activity is very experimental, but I will attempt to add value to the amount of time that you spend following me.

9. People argue from their vested interests.

Look at this article by Kevin Lovell, CEO of the South African Poultry Association. http://www.farmingportal.co.za/index.php?option=com_k2&view=item&id=1755:sa-chicken-farmers-are-being-roasted So, in the end they did introduce a tariff to stem the flow of "Dumping". Who were the losers. Not the wealthy that own and have shares in the the large chicken companies, but the poor - the millions that benefited from cheap protein in the form of cheap imported chicken.

This is a case where we were receiving "foreign aid" in the form of foreign country's taxpayers paying for our chicken! and what do we do - say no. This was one opportunity to lower our cost base so that we can become more competitive in the international arena. Now workers have to be paid more to afford the more expensive local chicken.

We shot ourselves in the foot once more by introducing heavy import tax on chicken. And remember in this interconnected marketplace - for every chicken that we do not import it is a a bag of oranges that we cannot export - they cannot buy if they can't sell. So we are all worse off because of interventionist policies.

8.

7 Afrikaanse kinderstorie

! Die tyd gaan verby. Greon begin hemde maak en Roi broeke. Greon het ‘n Hempmaakbesigheid Roi het ‘n Broekmaakbesigheid. Die hempbesigheid het nou 100 hemde. Die broekbesigheid het nou 20 broeke. Greon vir Roi – “Ek ruil een hemp vir een van jou broeke. Hulle se dis gaaf – kom ons maak so. Hulle ruil een hemp vir een broek. Hulle is albei gelukkig. Greon is gelukkig want hy is al ‘n bietje moeg om net een ou broek te dra – Die broek wat hy nou dra sit te lekker aan sy lyf. Roi is gelukkig want hy is al ‘n bietje moeg om net een hemp elke dag te dra – Die hemp wat hy nou dra laat hom alte netjies lyk…hy is al ‘n bietjie moeg vir sy ou verslete hemp. ‘n Dag of twee gaan verby. Greon sê vir Roi – “Ek is weer lus vir een van jou broeke. Ek gee vir jou een van my hemde vir een van jou broeke. Roi se – dis ‘n bietjie van ‘n probleem vir my ek het nie meer so baie materiaal vir broeke nie. Hoekom gee jy nie vir my drie van jou hemde vir ‘n broek nie dan kan ek iets kry om te eet en materiaal koop. Greon se nee dit is ‘n bietje kwai gaaf, ek gee jou drie hemde dan gee jy my twee broeke dan kan eek ook iets kry om te eet – Hulle toe “kom ons maak so”. Hulle ruil twee broeke vir drie hemde. Hulle is albei gelukkig. Roi is gelukkig want hy het nou drie hemde vir twee broeke gekry. Roi neem toe een van die hemde en ruil een vir ‘n brood met Mnr Roodt en die ander vir materiaal met Mat. Greon neem een van die broeke en koop ‘n vis by Mnr Visser. Almal is gelukkig met hulle transaksies want almal het iets wat hulle nie gehad het nie gekry in ruil vir iets wat hulle baie van het. Die volgende dag gebeur daar toe ‘n snaakse ding...