Capital and GDP Essential Question(s): What is the relationship between human capital, capital investment and gross domestic product GDP?

SS6E7 The student will describe the factors that cause economic growth and examine their presence or absence in Europe. Examine the literacy rate affect on life expectancy and standard of living. What is an entrepreneur?

Income The money that comes in. Your pay is your income. If he pays you rent, or if she pays back money she borrowed, that counts as income.

Expenses The money that you pay out. You pay rent, you pay for food, you pay back the money he let you borrow, you buy a hat, you go to the movies.

What is capital? A pile of money. An accumulation of wealth. A separate, huge amount of money that is not part of your regular income or expenses. You haven’t spent it—yet! It is potential. Capital lets you do something big! Most regular people don’t have a big blob of capital. Banks have capital.

What is human capital? The potential power of workers. The level of health, education, training, and skills of the workers in a country. If workers are healthy and expert, that’s a high level of human capital. If workers are hungry and sick, and have no education, that’s a low level of human capital.

Literacy Rate The percentage of the population that can read at a fourth-grade level. Countries with a high literacy rate often have successful economies.

Life Expectancy How long the average person lives in a certain country. In Norway, the average age of death is 83. In Russia the life expectancy is 68.

What is physical capital? Equipment for business. Roads, factories, ports, railroads, airports, mines, buildings, technology. A country with a high level of physical capital is a good place to do business. A country needs capital (a pile of money) to build physical capital (a railroad line leading to a seaport).

Natural Resources Gifts from nature. Trees, rivers, coal, oil. Natural resources help a country’s economy. Humans don’t create natural resources; we figure out ways to use them as raw materials and energy to make money!

Entrepreneur A person who has an idea and starts a business. Entrepreneurs usually start small, but they need to borrow capital if they want to expand their businesses. Banks lend capital to entrepreneurs with solid plans.

Gross Total. In economics, gross doesn’t mean icky. The gross amount is the total, whole, entire amount.

Domestic At home, within a country. International problems involve several countries. Domestic problems are within one country.

Gross Domestic Product The total value of all goods and services produced within one country in one year. How much a country produces. This is one way to measure the size of a country’s economy. A successful country has a high GDP. Per Capita GDP x Population = GDP

Per Capita Per person. From Latin, “for each head.” Twelve apples shared by four people is three apples per capita, or three apples for each person. GDP divided by the population = Per Capita

Per Capita Gross Domestic Product How much a country produces per person. Per capita GDP is how much a country produces divided by the number of people. This is the best tool to measure a country’s economy and a fair way to compare the economies of different countries. Learn to use the per capita GDP to brag: My country’s per capita GDP is higher than your country’s.

EXIT TICKET! Describe the role of natural resources in a country’s economy. . Explain the relationship between investment in human capital (education and training) and gross domestic product (GDP). Explain the relationship between investment in capital goods (factories, machinery, and technology) and gross domestic product (GDP).