ECON 205 2nd Edition Lecture 11 Outline of Last Lecture I Economic growth and development II Bilal Khan s lecture Economic Convergence of Pakistan with the United States in terms of GDP per capita III Federal Reserve and Monetary Policy IV Monetarism and Bank Reserves V The Stock Market Outline of Current Lecture I History of the Federal Reserve II Economic growth III Components of Growth Current Lecture I History of the Federal Reserve Foreign countries get US gold through trading Originally during the time of FDR for instance the price of gold was fixed to the US dollar Then foreign governments could collect enough US dollars to buy gold However during President Nixon s term in office he announced that the US would be floating their currency versus maintaining a gold standard the Nixon shock Now the dollar is fiat while it used to be backed to a certain reserve by gold Because the current interest rate of the Federal Reserve is nearly 0 monetary policy is rather ineffective When the interest rate rises the Fed can have more of a role in money policy II Economic growth Economic growth also called economic development is a continuing process since the industrial revolution of the 1800s it is a long term process III Components of Growth The major components of growth are Human resources like education experience skills motivation discipline entrepreneurship reactivity risk taking and hard work The US for instance became a world leader due to its human resources and high quality university system Natural resources are important to create output for commodities like land minerals fuel the environment water and waterways and extraction abilities i e mining Capital such as capital per worker factories machinery roads infrastructure and intellectual capital a human resource Technological advancement in knowledge or physical creations of inventions and innovations These advancements can take place is fields of science engineering management or entrepreneurship Managerial technologies have to deal with efficiency like the production line time and motion steadies resources steadies and other methods of efficiency Social technologies are organizational techniques including job transition during careers and company organizations like near tenure in Japan or corporate democracy in Sweden
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