RMI Final Exam Review Module 10B Risk Government Alleviating Human Misery I World poverty and economics A Our insatiable wants i Economic activity springs from human wants and desires ii Needs food water shelter clothing iii Wants entertainment communication variety unlimited iv Human wants are limitless B Our limited means i The fundamental economic problem is that the means available for satisfying wants which are resources are scarce ii Limited because 1 Resources are scarce and cannot be increased by any great amount in any given year 2 The technology the tools to create new resources not terms of a new cell phone available for production is subject to a limited degree of annual improvement never is a big jump in improvement in a year 3 Resources are usually divided into 2 broad classifications a Labor consist of all efforts of mind and muscle that can be used in production processes b Capital consist of all the nonhuman ingredients that go into the production of goods and services II The capacity of the economy to produce A GDP a broad way that measures the total market value of all final goods and services produced within an economy during a specific period of time i Primary measure of production ii Total value of production using market prices iii GDP as the economic pie iv Does not tell us what is produced v What is built in our nation takes in account what is built not who built it 1 Japan builds a car in USA changes USA GDP not III Production possibilities Japans GDP A Every economy has a stock of resources labor and capitol and technology to produce B How they are combine to produce products services is virtually limitless C Can be represented by the production possibility curve i Represents all the maximum possible combinations of 2 resources produced 1 Anything inside the curve is insufficient F 2 Anything outside the curve is unattainable z D Opportunity cost is not linear IV The optimal combination of goods and services A The primary goal for an economy is to maximize social well B Best combination is that which increases social well being as being as much as possible much as possible C Marginal Social Cost MSC the true cost opportunity cost borne by society when the production of a good or service is increased by one unit D Marginal Social Benefit MSB the true benefit to society of a one unit increase in the production of a good or service E Once we reach MSC MSB no further shifts in production will lead to increased well being V Economic growth A Generic Growth the pie gets bigger new resources new technology etc B Specific Growth one of the things on the production possibilities curve grows and the other does not VI Assessing GDP A Real GDP GDP in current dollars corrected for inflation i Answers the question are we producing more B Per Capita GDP GDP in current dollars divided by population i Are we using more labor resources VII What causes poverty A Quality of the labor force B Stock of capital capital accumulation i Small amounts of available capital resources and low capital to labor ratios translate directly into low labor productivity and poverty C Technology D Efficiency E Population VIII What can governments do A Less developed countries decisions less developed countries need to make i communism vs capitalism 1 The most important decision that a government must make with respect to economic development concerns the extent to which economic decision making will be influenced by government ii Planned vs unplanned economy 1 Planned government decide 2 Unplanned free market iii iv Involvement in education how involved Infrastructure 1 ex technology transportation healthcare v Attract FDI Foreign Direct Investment how can we have apple produce in our country B Developed countries how can we help the developed countries i Humanitarian aid ii World bank loans iii Partnerships cooperation iv Outsourcing Module 11 Global Risks Overview o Many risks do not respect national borders o The article for this module is meant to Orient and inform decision makers and the surveys was composed of less than 700 EXPERTS in risk o Objectives Explore the nature of systemic risks Map 31 global risks 3 constellations youth cyberspace geopolitics o The Global Risks Report uses a survey of risk experts to determine which risks should be included in the report 4 Underlying themes of the report o Trust very little of it o Long term thinking o Collaborative multi stakeholder action o Global governance Part 1 Understanding systemic risks o Global Risk occurrence that causes significant negative impact for several countries and industries over a time frame of up to 10 years o Systemic Risk breakdowns in an entire system as opposed to breakdowns in individual parts or components o Characteristics of systemic risks Modest tipping points combining indirectly to produce Risk sharing or contagion as one loss triggers a chain large failures of others Hysteresis or systems being unable to recover equilibrium after a shock o 31 global risks divided into 5 categories Economic risks Fiscal crisis Environmental risks Geopolitical risks Societal risks Technological risks o Risks analyzed along 3 parameters how the 31 risks were categorized Highest concern qualitative Likelihood and impact quantitative Interdependencies systemic o Top 10 highest concern understanding systemic risks Fiscal crisis in key economies Has the most interconnections Structurally high unemployment underemployment Water crises Severe income disparity Failure of climate change mitigation adaptation Greater incidence of extreme weather events Global governance failure Food crises Failure of a major financial mechanism institution Profound political and social instability o The Global Risks Landscape The 31 risks mapped based on likelihood and impact Climate changes Fiscal crises and Water crises are the worst based on likelihood and impact extremely high in both aspects quantitative Includes the breakdown by the 5 categories o Interconnections Map The 31 risks mapped based on how interconnected they are with the other risks Also includes the breakdown by 5 categories o Fiscal Crises number one concern in the article Causes Results o Water Crises Lack of confidence High level of government debt Connected to extreme weather Impact of food availability and prices Not just a third world concern o Climate Change Economic growth vs climate change Vulnerability who can adapt best Cost 100B per year for developing countries Time
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