Economic Growth Rate

  

Categories: Econ, Metrics

The economic growth rate measures economic growth—go figure, right? Specifically, it’s a calculation that subtracts new-GDP from old-GDP, and divides by old-GDP. And...that’s it.

The economic growth rate measures economic growth over some time period...depending on what GDP you’re using in your calculation. Quarterly, annually, or decade-over-decade are all common. When the economic growth rate is positive, everyone’s happy. When the economic growth rate has gone down two quarters in a row, we call that a recession. Sad face. Crying face happens when economic growth rate becomes negative, which means the economy is shriveling up like a prune.

A key thing about the economic growth rate is that it’s not adjusted for inflation. Rather, it’s a nominal reflection of growth if you use nominal GDP to calculate it. If you want to know what the real economic growth rate was, you’ll need to make sure you’re using real GDP to make your economic growth rate calculations.

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Econ: What are Determinants of Economic ...2 Views

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And finance Allah Shmoop What are the determinants of economic

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growth Shmoop let's talk money And specifically let's talk The

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reason some countries have a lot of money and some

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countries have well less This is pretty much the oldest

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question in economics Aside from the one about you know

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why the Kinsey in cross the road anyway this guy

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this guy's Adam Smith He's the godfather of economics He'll

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make you an offer You can put on a supply

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and demand curves Well his first best selling book was

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as you probably know everybody poops Yeah you confined it

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today in your local book suppository But here we're talking

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about macro economics Yeah his second big hit It was

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published in seventeen seventy six and was called the Wealth

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of Nations Sort of a tale of two cities only

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with countries The book covers question of Well why some

00:50

countries that had a lot of money and others had

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last and well here we are almost two hundred fifty

00:54

years later on everything's been solved and people are all

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happy around the world and every economic issue of inequality

01:01

and someone is clear now right Yeah I know Pretty

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much the absolute opposite So what are the determinants of

01:07

economic growth Or set another way What makes some countries

01:11

wealthy and what makes some poor eye what determines economic

01:15

success You know what A countrywide level Okay let's think

01:17

about how economic growth is measured Well the main measure

01:20

of economic growth in most of the world is GDP

01:23

I eat gross domestic product which is what you used

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to clean up that crowd that started growing on the

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floor of your bathtub last week Yeah your little brother

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Trevor claims he had nothing to do with actually GDP

01:34

As a measure of an economies output it represents the

01:36

sum total of all the stuff people make and all

01:39

the services they provide Well there's nothing economist love more

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than when GDP well grows you know like a kid

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from the eighties taking care of their Chia pet Well

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the same is true with GDP Constant growth is seen

01:51

as a sign that an economy is Elfi Think of

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it like a tree If there's enough rain and sunlight

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even giant sequoias are going to get a little bigger

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each year until they're chopped down and used to make

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packaging material Another thing to keep in mind Economies come

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in different sizes The U S Economy is like that

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giant sequoia you know pre chain sawing annual GDP Around

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eighteen trillion dollars Biggest economy in the world Other countries

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economies are smaller Some of them are much smaller This

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thing here Yeah this country It's Lichtenstein It's a tiny

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country In Europe the GDP of Liechtenstein is six point

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seven billion dollars If the U S is a sequoia

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Well Lichtenstein is Ah bonzai tree while Lichtenstein's GDP is

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basically the change found in the couch cushions of the

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U S But remember we're talking about GDP growth here

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not just the overall aggregate number that comprises GDP For

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instance Lichtenstein had a good run of GDP growth back

02:46

in the nineties and Lichtenstein has also had a pretty

02:48

good run lately Like Ramon I know fourteen GDP The

02:51

country grew four point five billion dollars to that six

02:54

point seven billion dollars figure there That's an annual average

02:57

growth of eight point one percent over that six year

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span Pretty good Well Lichtenstein's GDP is driven by resort

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skiing and the production of helmets and the production of

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Well Lichtenstein Ian's Yeah of which they're the number one

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producer in the world So how does this all happen

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What makes GDP grow Whether an economy is bigger small

03:15

Well Lichtenstein for instance benefits from its strong banking and

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financial sector It's no surprise that it saw big growth

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in the go go nineties Lots of sudden dot com

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millionaires looking for offshore places Teo you know store their

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cash and avoid taxes presumably And then there's Saudi Arabia

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Well for generations this was just a sandy homeland for

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wondering nomadic tribes Not much growth Then oil was discovered

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And while suddenly one of the biggest economic growth spots

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on the glove right there well how about China Well

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during the early communist days the country was isolated and

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pour It had trouble feeding everybody much less leading the

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world in economic exuberance Well then the country opened itself

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up to trade made itself the world's leading manufacturer Of

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all the trinkets and commemorative plates that we all order

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every night from Amazon it has become the growth story

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of the last thirty years So what do these examples

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have in common Well that question brings us to the

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determinants of economic growth Like we said economists have been

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thinking about this stuff for a long time Exactly how

04:14

many determinants you list depends on how specific you want

04:17

to be Some economists get more specific than others but

04:20

the list breaks down into some general categories here for

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major ones that contribute to GDP growth Access to natural

04:27

resource is right access to labor intellectual capital in a

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stable society right Well first on our list a country

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that control's important or scarce resource is that everybody wants

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everybody cares about Well if Khun generate a lot of

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growth by mining that resource recall Saudi Arabia same goes

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for you a United Arab Emirates and a bunch of

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other Middle Eastern countries In the second half of the

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twentieth century they discovered oil and well They stopped riding

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camels and started driving Lam Bo's a natural resource had

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become a determinant of their economic growth Up next on

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the list access to labor countries with a lot of

05:00

people can provide an important economic contributor right Lots of

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cheap man hours Well sometimes this is just labor in

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general Like with China When it opened itself up for

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trade and put its billion plus people to work while

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it basically became the unskilled labour capital of the world

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Everyone's factory floor labor force which has driven growth in

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the country for decades and made it a superpower well

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Countries with big populations tend to have an edge in

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this area but just having a lot of people are

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a lot of valuable resource is doesn't always lead to

05:29

economic growth There are other elements involved that matters what

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kind of labor you have So what kind of labor

05:35

Well let's think Intellectual capital Someone who can engineer a

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self driving car has a lot more value than a

05:41

worker who can you know drive a car as another

05:44

example Well let's look at South Korea The country famously

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has one of the world's most elaborate cellphone networks No

05:51

trouble getting a superfast data coverage there Even though it's

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a relatively small country both in terms of population Natural

05:57

resource is it's able to grow its economy by staying

05:59

on The technological cutting edge aren't also helpful Yeah a

06:02

strong education system It can be true within countries as

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well that you have this this cultural edge Look at

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Silicon Valley High tech companies thrive here because well they

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can draw from the PhDs that air cranked out from

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Stanford and UC Berkeley And you know they're right around

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the corner Or country might have a strong court system

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that can enforce patents and intellectual property if it chooses

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Teoh right If you came up with a new baldness

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cure would you go found a company in the U

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K Where they can enforce your patents Or would you

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go to Somalia or India and you know talk to

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the bald headed pirates there Yeah another example A stable

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banking system that attracts capital Remember our buddies and Lichtenstein

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while those banks bringing in global wealth or you just

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walk around the southern tip of Manhattan for a while

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When you think about sustainable economic growth you're thinking places

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like the US UK China etcetera like the UK is

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government goes back almost a thousand years no civil wars

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of no roving bands of paramilitary groups and no warlords

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And there's actually a thing called the Fragile States Index

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put out by a think tank called Fund for Peace

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Top of list South Sudan then Somalia then Yemen and

07:10

then Syria Alright well not coincidentally South Sudan's GDP dropped

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six point three percent Two thousand seventeen Yemen saw two

07:18

percent contraction Syria Well it's hard to get the figures

07:21

for Syria because it's in the middle of an active

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civil war and then you have Somalia which is actually

07:26

the best of the bunch Its GDP expanded two point

07:28

four percent in two thousand seventeen taking advantage of its

07:32

intellectual capital in piracy to drive growth Now stable society

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doesn't necessarily mean a free society It might be nice

07:38

to get free speech and free assembly like you have

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in the U S or the U K But just

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for economic growth while the key component is stability or

07:45

trust places like China where the communist government keeps a

07:49

lid on political dissent and on Google which it has

07:52

to censor its search results Or you have Singapore where

07:55

chewing gum is illegal and you can literally get caned

07:58

for breaking law Well the's air still traditionally high growth

08:01

places The growth comes despite there being famously repressive government

08:06

Well so country like Nigeria which has the seventh highest

08:09

population in the world and abundant natural resource is including

08:12

membership in OPEC Well they can't sustain any economic growth

08:16

Why will the country continues to see cycles of revolution

08:19

and unrest from unfair wealth allocation by the corrupt government

08:23

there it can't sustain a stable society which doesn't allow

08:27

it to build sustained intellectual capital It can't take advantage

08:30

of its access to labor or access to natural resource

08:33

is to drive sustained economic growth so well it's prospects

08:36

are pretty dim But if you bring all the determinants

08:40

of growth together big population lots of resource is stable

08:43

society Strong intellectual capital Well you've got something like well

08:47

say the U S In the nineteenth century where we

08:49

went from Well a nearly forgettable former colony to being

08:53

the largest economy in the world producing one of the

08:56

all time great GDP growth spurts in World history Way

09:00

did it only after we got rid of the pirates 00:09:02.644 --> [endTime] So hey Somalia You paying attention No

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