1. Key Differences between Human Capital and Labour
Labour is a generally a term that does not include any qualitative attributes. For example, while referring to labour, the terms manhours and units produced are used. Human Capital a term that often encompasses the qualitative and quantitative terms attributes of labor, for example, to measure human capital , the terms ability, efficiency as well as units of goods produced are used. (Gans, 2014)
2. Diminishing Returns causes growth to slow down as the GDP increases. For example, an advanced country such as USA experiences slower growth than a country like India. As more and more capital gets accumulated, the benefits derived from that capital become lower and lower. The productivity of any capital is not infinite. As the productivity of any capital reaches its highest potential, the returns begin to grow at a lower rate. For example, the productivity of human capital can be measured in the number of units produced per hour are used. However, there may be a limit to the number of units per unit of labour can produce, regardless of their efficiency. Similarly, countries have limited natural resources which puts a ceiling to their growth rate.(Gans, 2014) (Samuelson & NordHaus, 2004)
3. True GDP per capita refers to the total nominal GDP of the economy divided by the total number of people.(Samuelson & NordHaus, 2004) Given the increasing returns to scale, the GDP will simply be on a higher curve. However, the GDP will also be divided among the increased factors of production. For the GDP per capital to change, efficiency per capita factor of production must change.
4. Option d) would be the right answer. Productivity is measured as an increase in the number of units relative to a fixed unit of measurement. Since all other factors remain constant, Productivity would have to increase for the output to increase.
5. a) The fact that most countries will transition to developed economies provided they improve the health care is surprising. The importance of health quality came as a surprise.
b) India has the lowest life expectancy while Venezuela has a greater life expectancy , even though the GDP of India is arguably higher. Sweden and Singapore have greater life expectancy as expected.
c) It is expected that Sweden and Singapore will have a greater percentage of ageing population in the future and will have to deal with problems related to ageing more than India or Venezuela. Hence, they need to make more investments in healthcare for older populations.
d) Since the article was about health, I chose to explore life expectancy and its relationship to GDP. India is an interesting country to observe because of its high growth and exploring the effects of health on this growth was important. However, given that Indians have lower life expectancy, it is important to explore that it is because of the high number of child mortality or due to the average age being low.
6. a) The Millenium Development Goals are:
b) Countries, at the time of this report were on track for achieving their goals. According to the UN website, most countries have achieved their goals. (United NAtions Foundation, 2015)
c)
d)
e) Climate change has economic and social implications. Vulnerable communities are affected more than less vulnerable communities. Hence, environmental sustainability must be as goal that should be as important as achieving income equality.
7. a) The macro-economy is like an eco –system and the interaction between the entities of macroeconomic work in the form of networks. Long Term Investments in human capital are important not just for countries like India but also for countries like Australia. There have been improvements in the general living standards in the recent times due to economic growth.
b) The increase in productivity frontier due to new innovations is interesting. If the natural resources of the world cap the productivity, then efficiency will only improve them to a certain extent , but what if new materials were discovered ?
c) Is there a way to increase the productivity frontier of the world faster? For example, more natural resources could be discovered or unknown discoveries in material sciences could change the face of the world. (Frijters, 2012)
8 a) How will the growth frontier look like if the world discovers new materials that could replace the non-renewable materials such as minerals, fossil fuels?
b) The article was published in Sydney Morning Herald “ Reserve Bank warns how Australia can avoid another global financial crisis”
https://www.smh.com.au/comment/ten-years-since-the-global-financial-crisis-it-seems-like-it-was-yesterday-20170923-gyne0e.html
The article talks about the concerns of Phillip Lowe about the Australian economy and a possible asset bubble as the real income is not increasing in Australian household. The articles expresses concern about household dent and talks about increasing the productivity of human capital in Australia by increasing innovation and investments in Human Capital. This will increase productivity and consequently, worker wages.
c) “I wonder if she should have invested more in improving her skills than in this dress?”
Frijters, P. (2012, September 12). Macro economics: Fun Exploration of Long Tern Trends. PAul Flijters Talks to Dr. Dan Libich. (D. Libich, Interviewer)
Gans, J. e. (2014). Principles of Economics. Cengage Learning Australia.
Samuelson, P. A., & NordHaus, W. R. (2004). Economics: Seventeenth Edition. New Delhi: Tata- McGraw Hill Publishing Company.
United NAtions Foundation. (2015). Taking Stock of the Global Partnership For development. New York: United Nations Publications.
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