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CU-Boulder ECON 3535 - CPI: Consumer Price Index

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ECON 3535 1st Edition Lecture 2 Current LectureCPI: Consumer Price Index  below 1%o measure of inflationo low due to weak economic growth- GDP growth = 5%/year- <2% = good (no concerns about inflation)- Higher interest rates = lower investmento Government raises interest rates in order to prevent inflation in the long-termRussia:o -2.9% GDP growth in 2015  severe recessiono decreasing export revenues (sanctions) falling oil prices cuts in all of budget except for military ruble depreciation  raising price of imports capital flight  conversion of money into dollars and euroso raising interest rateso 17% interest rates by the Central Bank starting to use reserves to mitigate effects  sanctions will expire this springResource Paradox:o Produced capital + natural capital + intangible capital = predictor of wealth Human capital increases 7% with every year of education K = capitalCountry Intangible Produced Natural Total Wealth per CapitaLuxembourg 73.2% 26.1% 0.7% $818, 081These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.U.S. 84.6% 13.5% 1.9% $741, 142Congo 27.4% 8.1% 64.6% $2,477 Natural resources makes you a poor country over timeThe World Bank’s Categories of Wealth:o The World Bank divides wealth into four categories: high income, upper middle income, lower middle income, low incomeo Intangible K: predictor of wealth  develop education, people Greatest asset = people  wealth = investing in people , education, healthcare, open access, EQUALITY Discrimination makes countries poor because they eliminate a big source of wealthIncome Intangible KNaturalKProducedKTotal WealthHigh 81.2% 16.9% 1.9% $583,306Upper middle 67% 16.6% 16.4% $86,190Lower middle 50.5% 24.1% 25.4% $17,162Low 51.5% 14% 34.4% $6,730o 2005: China  rapidly developing countries invest a lot in physical capital in order to develop infrastructureo Natural resources are not a source of wealth, but povertyo U.S. imports most of its natural resources The manufacture of natural resources generate much greater value than the natural resources themselves Conversion of commoditiesEconomic Reasons for Resource Paradox:o Prices of natural resources: 1974=$15/barrel; 1980=$70/b; 1990=$30/b; 1998=$15/b; 2008=$110/b; 2012=$144/b; 2014=$110/b; 2015=$45/bo Currency appreciationo Rent seeking  creates the action of funneling into dependency on natural


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