1. POTENTIAL PRODUCT ECONOMIC GROWTH, SUPPLY SIDE Q = f ( L, K, TN) Labor - population Capital – National wealth Technological change

2. ECONOMIC GROWTH Economic growth – diferences in the levels of development History – Malthusian views, the growth of population to limits of resources - land; constant incomes in old civilizations; exceptions China (950-1250) and Europe (1500-1800) Modern economic growth 1800- medium term: the changes in the K/L ratio; long run: unlimited by the amount of land and natural resources Is economic growth unlimited? technological change, total factor productivity Simon Kuznetz, Robert Sollow, RES (1957), Edward Prescott, IER (1998) The indicators of economic development

3. GDP/CAPITA (PPP, 1990)

4. GDP/CAPITA (in US$, PPPi 1990) worldNorth America Western Evrope Eastern Evrope AsiaAfrica 1820 66712301254683577420 1870 87523801960937550500 1913 1525523734581695658637 1950 2111948445792111634894 1973 40911641711416498812261410 1985 47622041014113589223591468 2001 60492738419256602732561489

5. ECONOMIC DEVELOPMENT

6. METHODS FOR CALCULATING TOTAL FACTORS PRODUCTIVITY Cobb-Douglas production function Q = A K a L b e rt lnQ = lnA + a*lnK + b*lnL + r*t Q = A K a L (1-a) constant returns to scale dQ/dt = dA/dt + a*dK/dt +(1-a)*dL/dt rQ = rA + a*rK + (1-a) * rL rA = rQ – a*rK – (1-a) * rL

7. POPULATION DEMOGRAPHIC NOTIONS R.T. Malthus: An Essey in the Principle of Population 1798 Aassumptions, development Natural movements: natality, mortality and growth Migrations: immigrations, emigrations, migration saldo Structures: gender and age, active and non-active, working, employed, selfemployed Labor supply: demographic and social movements Labor demand: employment function rL=a + b rQ + c DUM, a – avtonomous, b – elasticity, c - assimetry

8. POPULATION GROWTH Malthus error 1800:7 mil 1825:14 mil 1850:28 mil 1900:112 mil 2000:1892 mil 10- 20- 30- natality mortality 1800 2000

9. ACTIVE POPULATION EU27 2009 EU27Slovenia Working population (mill)214.3 1.0 (1) share 0-14 years15.714.0 (2) share >65 years17.116.4 Old age dependency 100*((1)+(2))/(100-(1)-(2))48.743.7 Activity rate M59.461.8 Activity rate F46.150.5 Unemployment rate 8.8 5.6

10. POPULATION FORECASTS EU Year20102020203020402050 millions (1)< 15years 78 79 75 73 73 (2) 15-64 years334331321307294 (3) > 65 years 87103123140148 (4) Total population499513519520515 (2)/(4) activity rate0.670.640.610.590.57 ((1)+(3))/(2) dependence rate0.490.550.620.690.75

11. SUPPLY AND DEMAND OF LABOR Supply of Labor: demographic movements, age structures, migration, skills, price elasticity of supply: income effects substitution effects, wealth effects; Demand for labor: employment function Unemployment: open, hidden, classical, cyclical, structural

12. DEMAND FOR LABOR Labor market “a”“b”“c”consequences traditonal+00no labor market, high hidden socialismunemployment selfmanaged00.3-growing hidden unemployment socialismlow open unemployment classical (US)-10flexible labor market capitalismopen unemployment traditional European -0.5-low hidden unemployment capitalismhigh social protection neo-evropean-0.7+growth of open unemployment capitalismhysteresis rZ- growth of employment, rQ – growth of GDP, D- dummy, a-autonomous growth, b-elasticity, c- assymetry

13. Unemployment % EU25EU15EU10 9.0 8.014.3 Employment type % part-time 17.719.4 8.0 for definite time13.713.614.3 self-employed15.914.922.0 ∑47.347.944.3 PRECARIAN EMPLOYMENT

14. INFLATION The diminishing purchasing power of money, growth of prices; Mesurement: retail sale prices index, cost of living index Types of inflation: crawling, slow, fast, hyper inflation; The costs of inflation: redistribution, expected inflation, adaptation to inflation, indexation Inflationary tax: the diminishing value of money Seignorage: revenues due to monopoly of printing money,

15. GERMAN HYPERINFLATION January 1922 1 1 1 January 1923 16 75189 March 1923 45 132 -12 May 1923 70 221157 July 1923 354 2021386 August 1923 5394 255151262 September 227777 6459462532 October 2020125619189189029270

16. AGGREGATE DEMAND AND SUPPLY Supply:  =  e + *(Y-Y r )  =  -1 + *(Y-Y r )  e – expected inflation, Y r – equilibrium product Demand: Y=Y -1 +  *(m -  )  = m –1/  *(Y-Y r )  = m –1/  *(Y-Y -1 ) m - money

17. DEMAND PULL AND SUPPLY PUSHINFLATION D D1 S S1 D S P1 P YY1 P1 P Y1 Y Demand Pull Supply Push DEMAND PULL AND SUPPLY PUSH INFLATION

18. THE EFFECTS OF THE INCREASE IN DEMAND IN DIFFERENT THEORIES DS D SD C C C S Q Q Q neokeynesian classical keynesian DEMAND PULL INFLATION

19. INFLATION IN EU27, EU16 AND SLOVENIA