Chapter 1 Flashcards
Pg. 1-2
- Experiment conducted by the University of Pennsylvania, in which students were shown a flyer and asked to donate to Save the Children. On average, students raised ____ money for the flyer that described a poor girl in Mali, rather than the flyer that described a global problem.
- Takeaway: students felt ___________ when faced with the scale of the global problem, their contribution miniscule to combat poverty.
more
discouraged
Pg. 3-4
- Jeffrey Sachs, advisor to the UN, believes the answer to poverty is _______ aid/investments.
- William Easterly and economist Dambisa Moyo counter, arguing that aid prevents people from achieving self-reliance, creating a perpetual cycle of foreign aid dependance.
- When discussing poverty, there are __ sweeping answers. Rather, we must look at specific examples to determine how strategies were effective (or ineffective) in specific examples.
foreign
no
Pg. 5-6
- Philosopher Pete Singer emphasizes the moral imperative to save the lives of those we don’t know.
-As noted by Amartya Sen, economist-philosopher and Nobel Prize Laureate, poverty “leads to an intolerable waste of ______.” In other words, poverty strips away’s one capability to realize their full potential.
Pg. 8
- Pascaline Dupas conducted an experiment in Kenya, in which “individuals were randomly selected to receive different levels of subsidy to purchase bed nets.” Dupas’s experiment shifts the discussion of poverty from broad questions to narrower ones. Takeaway: Dupas’s experiment helps us “start to understand how poor people make _________.”
talent
decisions
Pg. 9
- On the left side of the political spectrum, Jeff Sachs (along with the UN, etc.) generally want to spend ____ on aid, and that things (such as computers in school) should be given away.
- On the right side of the political spectrum, Easterly and Moyo, do ___ support aid, believing that it ________ governments, and because we should respect people’s freedom.
- Sachs believes that countries can become _______ in poverty, while Easterly does not since many countries that were once poor are now rich.
more
not, corrupts
Pg. 11
- “There will be a poverty trap whenever the scope for growing ______ or wealth at a very fast rate is limited for those who had too little to ______, but expands dramatically for those who can ______ a bit more.”
income, invest, invest
Pg. 12-13
- Figure 1 Graph: Showcases that income in the future for those trapped in poverty is _____ than income today: the curve is _____ the diagonal line. They move down from point A1 to A3 until they reach trapped in poverty at point N.
- For those that start outside of the poverty trap zone, income tomorrow is ______ than income today: the curve is _____ the diagonal line. They become richer and richer, moving from point B1 to B3, until a point.
- Figure 2 Graph: Showcases no poverty trap, in which someone’s income stops growing (from point A1 to A2, A2 to A3, etc.). Takeaway: a handout may boost someone’s income temporarily, but will ___ change where they are eventually headed.
lower, below
higher, above
not
Pg. 14
- “In an RCT, as in the studies on bed nets, individuals or communities are ________ assigned to different “treatments” - different programs or different versions of the same program. Since the individuals assigned to different treatments are exactly comparable (because they were chosen at ______, any difference between them is the effect of the treatment.”
- The J-PAL (Poverty Action Lab) has showcased the embracement of randomized trials.
randomly, random
“The short history of living conditions and why it matters that we know it” (by Max Roser)
- Chart showcases that by 2018, almost __% of the world’s population lived in extreme poverty, compared to nearly __% in 1820, nearly half in 1950, and more than a third in 1990.
- Thanks to economic growth, the unprecedented population growth of the last two centuries did ___ result in less income for everyone and drive people into extreme poverty.
10%, 80%
not
Max Roser Article Continued
- Productivity = ______ / _____ (“as productivity increased, we benefited from more ______ but also from less _____ - weekly working hours fell very substantially.”)
- Economic Growth has also changed the relationship between people. Before, its was a ____-sum economy, in which someone becoming better off meaning someone else had to become worse off. Now, in a positive-sum economy, someone could become better off while others become better off simultaneously.
output/input
output, input
zero-sum.
Max Roser Article Continued
- Literacy: “in 1800, there was a chance of _ in 10 that you weren’t able to read; today, close to _ out of 10 people are able to read.”
- Health: Global child morality rates have _________ by 10 fold since 1800, yet 15,00 children still die every day on average.
- Freedom: Near the late 19th century, 0% of people lived in democracies; today, a little above __% of people live in a democracy.
- Population: The demographic transition is underway, in which high _________ rates have lowered to match low mortality rates. The global population growth rate has already ______, c. half a century ago.
- Education: Projections suggest that by 2100, there will be almost __ one without formal education
9, 9
decreased
50%
fertility, peaked
no
Max Roser Article Continued
- The media influences many peoples negative perspective on global development, by focusing on ______ events (ex. plane crash, natural disasters). Headlines almost never report gradual, positive trends. As a result, most people are ________ about global development, not knowing that progress against serious problems is even possible.
- Still work to be done: __% of the world lives on less than $30 per day.
single
ignorant
85%
“When it is growing, especially if inflation is not a problem, workers and businesses are generally better off than when it is not” (by Tim Callen)
- GDP = _____ ________ _______. GDP measures the monetary value of final goods and services produced in a country in a given period of time. GDP is a good indication of how much an economy produces each year, but fails to consider unpaid work and the depletion of capital stock (also called ____________).
- GDP formula = C + I + G + (X-M) or ________ spending + ________ spending + __________ spending + (_______ - _______)
gross domestic product
depreciation
consumer spending + investor spending + government spending + (exports - imports)
Tim Callen Article Continued
- ____ GDP takes into account price changes, to see whether the value of output has risen because more is being produced or simply because prices have increased.
- GDP is ___ a measure of the overall standard of living or well-being of a country. It does not also consider the ___________ of GDP among residents of a country.
real
distribution
In Class Notes
- Previous approaches to tackling global poverty: fixated on “___ questions”, lack of proper ________ to answer these questions, policy based on ideology/intuition
- Banerjee and Duflo: MIT professors, Nobel laureates (economics): poverty is complex and multifaceted, cannot be explained by simplistic narratives, small evidence-based interventions
- Randomized Controlled Trials (RCT): provides concrete evidence to inform policy (ex. Malaria)
- Every year over half a million deaths (mostly _______ ________), sleeping under insecticide-treated bed nets can save many lives
“big questions”, evidence
African children
In Class Notes Continued
- Trends in Poverty & Inequality over last 200 years
- poverty: ________ levels of income (material well being among poor people)
- inequality: ________ levels of income in a society as a whole
- 19__ = turning point, with much faster progress against extreme poverty; global inequality increased until 19__, recently inequality between countries has decreased (living standards in poorer countries catching up to rich countries)
- Child Mortality: share of children (born alive) who die before the age of _ years old
absolute
relative
1950, 1990
5
In Class Notes Continued
- Income person in the U.S.: has _________ 10 fold since 1900 (expressed in real GDP per person), due to economic growth.
- In order to generate income, _____ and ________ must be produced and sold in market.
- For an economy as a whole: income = ___________. Every transaction has a buyer & seller, in which every dollar of spending by some buyer is a dollar of income for some seller.
- GDP = total market _____ of all _____ goods and services produced within a country in a given period of time. GDP includes items produced in the economy and sold legally in markets (excluding most items produced and consumed at ____ that never enter the marketplace; items produced and sold illicitly such as illegal drugs)
increased
goods and services
value, final, home
In Class Notes Continued
- GDP Expenditure Approach: value of total __________ = total ______ = total expenditure on economy’s goods and services
- Formula = ___________ (C) + __________ (I) + __________ purchase (G) + (exports - imports)
- C = spending by households on goods and services (except purchases of new housing)
- I = spending on capital equipment, inventories, and structures (including new housing)
- G = spending on goods and services by local, state, and federal governments (excluding ________ payments such as social security)
- GDP per person = GDP/____________
production, income
consumption + investment + government purchase
transfer
population
In Class Notes Continued
- Inflation = rising overall _____ level in the economy; a unit of money (e.g. U.S. dollar) has ____ purchasing power over time.
- Inflation rate: percent change in price level
- Real vs. Nominal GDP: nominal values the production of goods and services at _______ prices, not corrected for inflation, while real GDP values the production of goods & services at ________ prices, corrected for inflation
- GDP Deflator: price index used to convert from nominal GDP to real GDP
- Formula: Real GDP = (_______ ___/ ___ ________) * 100
- Real GDP per capita = ____ ___/__________
- Inflation Rate = ((New GDP Deflator - Old GDP Deflator) / Old GDP Deflator) * 100
rising, less
current, constant
(Nominal GDP/GDP Deflator)*100
Real GDP/population
In Class Notes Continued
- Higher GDP per person indicates ______ standard of living, but it is not a perfect measure of well-being/happiness
- Some things that contribute to well-being are ___ included in GDP (e.g. leisure, clean environment, almost all activity that takes place outside of _______)
higher
not, markets
-Stock Variable: measured at a _____ in time (ex. wealth)
-Flow Variable: measured per ____ of time (ex. GDP, income)
- Exchange Rate Method: Use the market exchange rate (rate at which one currency trades for another) to convert to same currency (in practice, U.S. dollars) Does not account for price differences across countries. Leads to understating the level of output/income in poorer countries.
- Purchasing power parity (PPP): Use rate at which currency of one county would have to be
converted to that of another country to buy the same amount of
goods and services in each country. Leads to understating the level of output/income in poorer countries (two countries may have the same output, but one just has cheaper prices).
- GDP = value of production within a country’s _______
- GNP (Gross ________ Product): value of production by a country’s nationals (also known as Gross National Income/GNI) = GDP + factor income earned in foreign economy by _________ - factor income earned in domestic economy by nonresidents
point
unit
border’s
National, residents
In Class Notes Continued
- Productivity = the amount of goods & services produced from each unit of labor input, written as _ (total quantity of output produced/Real GDP)/_(quantity of labor) = output per unit of labor
- Computing long run economic growth: compounding - Xt (final value in T years) = Xi(initial value)(1+g(annual growth rate))^T
- Doubling Time = 70/g
Y/L
Study Guide Question
- The S-shaped curve represents the ____________ between today’s income (x-axis) and future income (y-axis). The 45-degree line represents points where today’s income ______ future income. At low levels of income, the S-shaped curve is _____ the 45-degree line,
suggesting that the individual is unable to attain higher future income for the given level of
current income. Beyond a certain threshold level of income, the curve is steeper, suggesting that the individual can attain higher future income. Interventions such as education and health improvements can lead to higher productivity, which can shift the curve _______, making it easier for an individual to escape the poverty
trap. Interventions like cash transfers and microloans can help individuals cross the threshold level of income allowing them to move towards higher future incomes.
relationship
equals
below
upwards
Total output (Y) depends on _______ of production (inputs)
- Labor (L) = number of works, labor hours
- ________ capital (K) = stock of equipment/structures
- Human Capital (H) = knowledge/skills of workers
- Natural Resources (N)
- Technology = society’s understanding of the best way to produce goods & services
- Production Function shows relationship between output & inputs: Y= AF(L,K,H,N)
- Assuming output only depends on two inputs, the formula becomes: Y/L = AF(K/L)
factors
physical capital
Marginal product of capital (MPK) = how much output increases when a worker is given an extra unit of capital (all else constant)
- When an economy has a low level of capital, an extra unit of capital leads to a large ________ in output
- Factor accumulation and technological progress lead to rises in ____________ over time.
- Poorer countries have the capacity to grow faster, due to lower capital per worker, and less technology than the current level of technology that exists globally
increase
productivity
