World Economy

Methodological aspects: how to

compare economies
 World Economy
• World Economy – all economic actors that
interact in the area of production,
consumption, economic management,
work in general, exchange of financial
values and trade of goods and services,
that are interdependent and create a
system (world economic system)
 World Economy
• World economy is an interdependent
system between actors. Complex
relationships emerged due this
interactions.

• Name some interactions you recognize in

the world economy?
 World Economy
• The system of world economy is in relative
equilibrium

• Actors of the world economy

– Countries/states
– International/multinational/transnational
corporations
– International organizations
 Methodological aspects: how to compare
economies

State
• - A State is a self-governing political entity.
• - A nation is a tightly-knit group of people which share a
common culture. Nations are culturally homogeneous
groups of people, larger than a single tribe or
community, which share a common language,
institutions, religion, and historical experience.
• - A nation-state is a nation which has the same borders
as a State.
• - The term State can be used interchangeably with
country.
 Methodological aspects: how to compare
economies

An independent State:
• Has space or territory which has internationally recognized
boundaries
• Has people who live there on an ongoing basis.
• Has economic activity and an organized economy. A country
regulates foreign and domestic trade and issues money.
• Has the power of social engineering, such as education.
• Has a transportation system for moving goods and people.
• Has a government which provides public services and police power.
• Has sovereignty. No other State should have power over the
country's territory.
• Has external recognition. A country has been "voted into the club"
by other countries.
 Methodological aspects: how to compare
economies

State powers
• - State of law – nobody is above the law
• - Totalitarian state
• - Legislative power – the Parliament
• - Executive power – the Government
• - Juridical power – the Supreme Court of Justice
State functions
• - Minimal state – minimum of attributions
(defense)
• - Welfare state – protection
 Methodological aspects: how to compare economies

Potential of a country
• Natural potential
• Economic potential:
• Absolute economic potential: GDP. GNP (GNI ), GDP PPP
– GDP =the value of the total final output of all goods and services
produced in a single year within a country's boundaries.
– GNP is GDP plus incomes received by residents from abroad minus
incomes claimed by nonresidents.
– The PPP conversion factor shows the number of units of a country's
currency required to buy the same amount of goods and services in the
domestic market as one dollar would buy in the United States.
• Relative economic potential: GDP/capita
• Inequality: Lorenz curve, Gini index, World Bank “20%”
• Level of development: HDI
Bangladesh
Countries’ comparisons
Exports of goods and services (% of GDP) 18
GDP growth (annual %) 7
GNI per capita, Atlas method (current US$) 480
Imports of goods and services (% of GDP) 24
Inflation, GDP deflator (annual %) 5
Population growth (annual %) 2
Population, total 144345058
Time required to start a business (days) 37

Bolivia
Exports of goods and services (% of GDP) 35
GDP growth (annual %) 5
GNI per capita, Atlas method (current US$) 1100
Imports of goods and services (% of GDP) 22
Inflation, GDP deflator (annual %) 12
Population growth (annual %) 2
Population, total 9344741
Time required to start a business (days) 50

Brazil
Exports of goods and services (% of GDP) 15
GDP growth (annual %) 4
GNI per capita, Atlas method (current US$) 4730
Imports of goods and services (% of GDP) 12
Inflation, GDP deflator (annual %) 4
Population growth (annual %) 1
Population, total 188694395
Time required to start a business (days) 152
 Methodological aspects regarding economics

State intervention: state intervention occurs as a

form of protection against the workings of the
market: public goods, management of
externalities, macroeconomic stability (protection
of competition, unemployment), distribution and
redistribution of incomes (taxes, poverty)
• Instruments of intervention
– Property
– Plans
– Economic policies