● History of Economics
Направи си картон с всички формули по П25, П15 и П21
● GDP = Gross Domestic Product
Living standard = the material well-being of the average person in a given population.
Measured by:
- housing
- cars
- education
- health care
- war
- pollution, etc.
There are serious problems such as undernourishment.
12/03/25
Real VS Nominal GDP
nominal = at current prices
real = at constant prices
Exercise:
● How does income relate to life expectancy?
Video:
https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.gapminder.org%2Fanswers
%2Fhow-does-income-relate-to-life-expectancy
%2F&psig=AOvVaw31w3FNCusdX7W9oCOPiSDT&ust=1739451024860000&source=imag
es&cd=vfe&opi=89978449&ved=0CBcQjhxqFwoTCOjMjqCWvosDFQAAAAAdAAAAABAE
As average income rises, so does life expectancy
A change of something should be presented in percentage.
Real GDP formula:
Solution:
1. nominal GDP for 2019 and 2020:
2019 = (100$ x 1) + (10$ x 8) + (5$ x 4) = 100 + 80 + 20 = 200
2020 = (100$ x 1) + (12$ x 10) + (4$ x 5) = 100+120+20 = 250
2. the percentage of growth in nominal GDP from 2019 to 2020
((250 - 200)/200) x 100 = (50/200) x 100 = 0,25 x 100 = 25%
3. The real GDP for 2020
(100% x 1) + (10% x 10) + (5% x 5) = 100+100+25 = 225
The price from the last year (2019) and multiply it by the quantity of the current year(2020)
4. GDP deflator: ( it’s all about the prices )
Nominal GDP/Real GDP x 100
250 / 225 x 100 = 111,11
5. The inflation rate between 2019 and 2020
By how much did prices go up ?
Inflation = 11%
Real GDP growth : 225 - 200 / 200 = 25/20 = 12,5%
CPI /consumer price index = a measure of the overall prices of the goods and services
bought by a typical consumer.
1 exercise :
they are on the slides
=> the amount of products stays the same, only the prices change
2 exercise:
base year is 2008
2008 = 1200$
2014 = 1436%
CPI = (1436 + 1200) x 100 = 119,7
So, prices increased by 19,7% between 2008 and 2014
19/03/25 Poverty and Inequality
● Poverty rate is the percentage of the population whose family is below an absolute
level called the poverty line.
absolute poverty = don’t have access to the basics of life - food, clothing, shelter
relative poverty = not able to access what could be considered acceptable standards of
living in society (e.g. material deprivation - smartphone)
Poverty in Europe - the poverty line is set at 60% of the median income.
equivalised household income
● The Lorenz curve = shows the relationship between the cumulative percentage of
households and the cumulative percentage of income.
The more bowed the curve is, the greater the degree of income inequality !
● The Gini coefficient = a measure of the degree of inequality of income in a country
The lower it is, the better. Lower = less inequality !
France = high inequality !! in slides ; helpful for P24 research
● disposal income = income that is left after paying taxes and for things that are
essential, such as food and housing.
Policies to reduce poverty :
- minimum wage laws
- social security
- negative income tax - subsidies, financial health
- in-kind transfers - food banks - food for free ; homeless shelters - shelter for free
Exam question: The magnitude of the effect of the minimum wage depends on the price
elasticity (sensitivity) of demand for labour. Why? (on the slides)
Answer: More people have more money so they spend a lot, prices go up so less people
can afford the products.
The higher the price, the more people want to work. Demand for labour will be high
26/03/25 LW7 Growth theory
● Common causes of poverty:
- lack of access to food and water
- lack of jobs
- warfare / conflicts
- social injustice
- lack of infrastructure
- climate change
- lack of education
● Real GDP = without inflation
You will know the amount of time needed to double the value.
Key determinants of economic growth
● physical resource endowments = the natural resources that a country or region
possesses, which can be used for economic development.
These include: Land (e.g., fertile soil, forests); Water (e.g., rivers, lakes, groundwater); Minerals
(e.g., gold, coal, oil, natural gas); Climate (e.g., suitability for agriculture or tourism).
These resources influence a country's economic potential and development strategy. However,
how they are managed and utilized is just as important as their availability.
02/04/25
Why do we trade?
- To make a nation wealthier and create peace by trading, which means divers ration
exchange their properties.
Absolute Advantage
A certain area/ country is good at something, let’s say producing oranges and instead of
robbing or starting a fight, trading is a better and more peaceful solution to share the
products.
Production in Self-sufficient
- producing a product with the resources that the country has without any outside help.
Production in socialisation and trade condition
- Producing only your specialised product and sharing it with the others, which makes
every region more wealthy.
—> Downside: Nations are depending on each other and If they're in a war with each other,
this can limit their resources in general.
Comparative advantage
Either being super good in everything or being worse at making staff.
Perspective as a country that is bad in everything:
Only Produce where you suck the least and still trade.
16/04/25 LW9
Economics for “good”
🔹 Key Concepts and Influences
● Club of Rome (1972, "Limits to Growth")
A think tank of global leaders, policymakers, and scientists emphasizing the dangers
of unchecked growth, ecological overshoot, and systemic crises.
● UN Economist Network (UNEN, est. 1945)
Released "Shaping the Trends of Our Time" (2020), addressing five major global
megatrends:
- Climate change
- Ageing demographics
- Urbanization
- Digital technologies (4th Industrial Revolution)
- Inequality
HAPPY PLANET INDEX: https://happyplanetindex.org/compare/?c=BGR
%2CDEU&am=hpi_score
🔹 Challenges in Current Economic Systems
● Economic Growth ≠ Progress
Despite growth, we face multiple, interlinked crises: environmental degradation,
conflict, inequality, rising costs, and social instability.
● Limitations of GDP
- Measures flows, not stocks (e.g., natural capital, biodiversity).
- Ignores intra-household economics, non-monetary contributions, and the
attention economy.
- Lacks long-term vision (discounts the future).
● Policy Blind Spots & Externalities
- Short-termism and lack of inter-generational equity.
- Inadequate representation of marginalized communities.
explanation:🔸 Short-termism and lack of inter-generational equity
This means:
- Governments and economic systems often focus only on the short term—like boosting
growth or winning the next election.
- They don’t think enough about the future, especially how today’s decisions affect future
generations.
👉 Example:
If we overuse natural resources today to grow the economy, future generations might suffer from
pollution, climate change, or resource shortages.
📌 "Inter-generational equity" is about fairness between current and future generations—making sure
we leave behind a healthy, stable world for our kids and grandkids.
🔸 Inadequate representation of marginalized communities
This means:
- Many policies and economic decisions don’t include or consider the voices of poorer
or less powerful groups, like women, minorities, or low-income communities.
→ As a result, these groups often don’t get the support or resources they need, and the
inequality gap keeps growing.
👉 Example:
If a government builds a new transit system but doesn't include poor neighborhoods, those
residents miss out, even though they might need it the most.
📌 Better representation means involving all kinds of people in decision-making so policies are fairer
and more effective for everyone.
🔹 New Directions: Alternative Metrics & Paradigms
- Human Development Index (HDI) (1990)
Introduced by the UN as a more human-centered measure.
- Environmental-Economic Accounting (2012)
A standard to assess natural and economic capital integratively.
- NESD Paradigms
New Economic and Social Development models to address systemic policy gaps.
🔹 "Green vs Green": Navigating Trade-offs
● Goal Interlinkages:
- Green Economy: Can drive SDGs 6–9 (e.g., clean water, energy, industry).
- Care Economy: Drives SDGs 1–5, 10 (poverty, hunger, health, education, gender,
equality).
→ Key Insight: No single-issue solution. A system-wide, multi-dimensional strategy is
essential.
🔹 Real-World Experiments in the "Wellbeing Economy"
Countries pioneering new models:
- Scotland – Wellbeing dashboard, National Performance Framework
- New Zealand – Wellbeing Budget (Living Standards Framework)
- Wales – Commissioner for Future Generations
- Finland – National Wellbeing Action Plan
- Iceland – Gender equality, renewable energy, 39 wellbeing indicators
- Costa Rica – Top Happy Planet Index, Social Progress Index
- Bhutan – Gross National Happiness index
🔹 Changing the System: Barriers and Tactics
Barriers:
- Governmental inertia, political silos
- Status quo beneficiaries
- Lack of urgency or bandwidth
- Conceptual confusion and resistance
- Weak implementation and misappropriation
- Intra-movement disagreements
Tactics for Change:
- Critique current systems while promoting clear visions
- Build broad coalitions
- Use relatable language, shared values
- Involve intrapreneurs and policy champions
- Aim for quick wins to build momentum
- Celebrate social justice outcomes
23/04/25
● intrapreneur = from the inside of the system
MONEY
The monetary system
- barter = exchange goods
- double coincidence of wants
- money = the set of assets to buy goods and services from others
Functions of money
- medium of exchange
- unit of account
- store of value
- liquidity =
Kinds of money
- fiat money
- gold standard
- counterfeiting = printing fake money ; the illegal reproduction of money, products, or
services with the intent to deceive ; huge penalties if caught committing this crime.
Banks
They CREATE money
Risks
- credit risks - risk in defaults on loans
- systemic risk - risk of failure across the whole of the financial industry
- liquidity risk - risk of not being able to fund demand for withdrawals
Basel Accords
