The Income and the Output of Nations - Annotated Bibliography Example

THE INCOME AND THE OUTPUT OF NATIONS al Affiliation) Word Count: 2,062 Table of Contents Page……………………………………………. Table of Contents……………………………………..2 Analysis of Article 1………………………………….3 Analysis of Article 2………………………………….6 Conclusion …………………………………………....9 Bibliography………………………………………….10 Critical Analysis of Article 1 “Measuring the Economy: A Premier on GDP and the National Income and Products Accounts” This article, published by the US Department of Commerce focuses on a discussion focuses on how to measure economic development of nations. The article is driven by hypothetical questions such as: “Is the economy growing fast?”, “Is the economy slowing down?”How does the trade deficit affect economic growth of a nation?” and; “What happens to the spending patterns of a nation?” This discussion will focuses on a critical analysis of the document, basically providing personal opinion regarding the information provided in the article on income and the output. From the article, it the authors assert that in order to understand how a nation measures its income or economic growth, through the determination of how fast or how slow the economy is growing, one can seek information from the National Income and Products Accounts (NIPA’s). This is an imperative strategy owing to the fact that each country has its national income and products accounts that indicates its annual economic product. The authors goes further and provide an explanation of the meaning of NIPA’s, relating it to the context of the United States of America. According to the authors, NIPA’s provide economic data regarding compositions and value of output produced in the United States. One of the features of economic outputs as indicated in the article is Gross Domestic Product; this is a crucial example in this case owing to the fact that GDP is the most watched means of measuring an nation’s income and output. However, in order to comprehend the meaning of GDP, it is pertinent that one understand its meaning; the authors of the article notes this pertinence and provides a explanation of the meaning of GDP, indicating that Gross Domestic Product is basically a composition of goods, services and products produced for sale in a market. However, this definition appears economically incomprehensive owing to the fact that it does not indicate that GDP should be a sum of these economic facets. The major strength of the discussion presented in the article in relation to a nation’s income and output, is that the authors mentions a variety of aspects that basically play a crucial role in the determination of a nation’s economic development. The first aspect, crucial for economic development indicated in the article is flow of income and expenditure within a nation in a circular manner. This information can assist one to comprehend how the features of NIPA are achieved and how an economy functions, it is crucial that one understand of simple expenditure and income flows in a circular manner. The other important feature that one should take into consideration when measuring the income and the output of a nation is the basically the GDP; in the article, the authors strategically identifies out of a nation as a crucial aspect of measuring the success of an economy or its failure. However, an important clarification made by the authors is that in as much as the Gross Domestic Product of a nation is used as a measure of a nation’s economic progress, it should be mistaken as tool the indicates that well-being of a nation. This is a valid and accurate statement from an economic perspective, although, it appears that the authors meant that GDP is not a indicator of being economically stable, a statement that may be refuted by many economists owing to the fact that: The economic well-being of a nation or an individual is generally based on the needs of that nation or individual and other several variable factors. Another imperative aspect of measuring the economic progress of a nation as indicated in the article involves a consideration of the income approach. This is one of the economic features that one may find in the NIPA as indicated in the article. According to the article, income or Gross Domestic Income (GDI) is simply an opposite version of GDP as they claim that it is GDP measured through the income approach. Other researchers have indicated that the measurement of GDI involves taking into consideration the outputs, which are measured to determine the income. This is a crucial clarification made in the article, owing to the fact that input such as labor and financial resources used in a production process is a crucial determinant of output thus it would be economically relevant to assert that income is equal to the output. In order to facilitate an understanding of this concept the authors to go an extent of providing a simple tabular elaboration of how inputs can be used in a smaller industry to determine its outcomes or products. This is a crucial strategy employed by the authors, as it could enhance the understanding of the concepts provided in the article regarding the impacts of input on productions, especially to persons, who are not properly acquainted with economic knowledge. The indication of NIPA as imperative source of information for the determination of the income and the output of nation as a means to comprehend its economic development progress is not adequate, owing to the fact the NIPA is made of various components that requires a proper understanding. In this regard, the authors of the article goes to an extent of discussing the various components of NIPA and how the facilitate economic development. These components are: The Domestic Income, Private Income, Personal Income, Government Expenditures as well as Receipts, Foreign Transactions and a Domestic Capital. This is a crucial aspect of information regarding the economic progress of a nation mentioned by the author. The rational of this information could be based on the fact that, the measurement of a nation’s economic progress is based the sum total of the components of found in NIPA; from an economic perspective, one cannot measure the economic success or failure of a nations through the determination of only one of these component i.e. Government expenditures. Critical Analysis of Article 2 “Human Capital and the Wealth of a Nation” In this article, written by Rodolfo and Ananth, focuses on a discussion based on an establishment of the contribution of human capital to the success of some nations and why certain nations are considered richer than others. In this case, it is apparent that human capital is considered an input or factor of product that has contributed significantly to the success of some nations in more pronounced manner as compared to others. It is seems that a greater consideration is given to human capital as a major contributing factor towards the success of the nations and a probable cause to the existing variance of nations’ wealth. Economically, input is directly related to output when production conductions are constant; human as an input in production processes is directly related to the outputs, which are usually used to determine the wealth of nations. This information is indicated in the article, with the author explicating that the variances exhibited by the investment of human capital various dimensions of production is a contributing factor to the variance exhibited among nations in regard to their economic prowess. The article also focuses on a qualitative study that attempts to determine why some nations are richer as compared to others taking into consideration human capital as an input in their production processes. The rationale of this study is based on a Total Productivity Factor, by focusing on education or schooling of labor in a nation. The discussion specifically takes into consideration a qualitative approach focused towards understanding the effects of an extra one year of schooling on the quality of human capital. In this case, it seems that schooling is considered a tool for improving the functionality of human capital as an input for production. From an economic perspective, the higher the quality of input, the higher the quality of desired output; that is education or schooling improves the capacity of human functionality in production process thus leading to high quality of production/output. Quality as an aspect of production entails the achievement of efficiency and efficacy. Therefore, human capital with a higher level of schooling, leads to enhanced efficiency and efficacy, thus high quality of desired output. The article also asserts that nations’ economies rely on Total Factor Productivity and the variations that exist in its demographic to facilitate development or to account for the variability exhibited in its income per capita. However, this assertion seems to be extreme; this is due to the fact that there are certain imperative differences in the prices of capital; that is, order to determine the productivity per individual, one has to take some TFP into consideration for instance: Training how to use certain technologies as well as schooling and its associated expenses. Apart from schooling, associated expenses and training on how to use technology; the article also examines the individual abilities in learning as cross-country variable that has had significant impacts on the productivity of the individuals. This is a relevant and a valid point of view, based on the fact that schooling and training on how to use technology are considered external factors that imposed upon individual to facilitate the capacity towards production; however, from a social point of view, training and schooling may not be adequate owing to the fact that some individuals possess an relatively more intrinsic capacities to learn as compared to others. Additionally, the essence of attaining extra years in education or learning activities is another pertinent variable that can affect human capital as an input or a factor of production, thus having a significant effect on the general outcome. At the beginning of this article, the authors posits that their study is based on qualitative dimension, however, at the middle of the article, there are several computations that have been undertaken to determine various issues ascribed to human capital as an input indicating the application of quantitative data handling. This could be considered one of the major weaknesses of this article as it seem to have a mixed approach in regard to the analysis of the data, while the authors claim it is a qualitative study. Apart from training, intrinsic capacities to learn among individuals and training, there are also other social factors that affect the quality of human capital as an input for productivity. Some of these factors have been elaborated in the article for instance: The article points that early childhood development and on-job training and extra social factors that have a significant effect on human capital as an input in a nation’s production activities. However, some of the social factors that have not been mentioned in the article as playing crucial roles on development of human capital are: Learning environment i.e. the existence of stable governance systems that do not interfere with learning and skill development processes. The other imperative aspects developing human capital as a input in a nation’s production process as indicated in the article are the specific technologies used to undertake training and schooling processes. The research indicates that the higher the quality of technology used in training human resources, the higher the rate information acquisition, thus an enhanced capacity to perform duties. Conclusion It is prudent to conclude that the income and outputs of nation are the basic determinants of its Gross Domestic Income. Additionally, taking into consideration the information provided in the article, there is a great sense of relationship between the economic income of a nation and the overall output, that is the more income a nation invests towards its economic development, the more output or productivity is achieved; however, this may be relative to other factors of product such as quality based on efficiency and efficacy. Apparently the second article majorly focused on the human capital as an input of productivity. However, the studies that were undertaken by the authors of this article indicate that, despite the fact the quality of inputs, human capital, have a significant effect on production/output, there are other several aspects that affect the quality of human capital as a production resource. In this regard when performing studies based on human capital as determinant of a nation’s success, it is pertinent to evaluate and analyze other associated factors. The major weakness of this article, however, emerge from the fact it is introduced as a qualitative research article, but the application of mixed methods of research is evident at the middle of the article. Bibliography Rodolfo, M., & Ananth, S. (2010, December 1). Human Capital and the Wealth of Nations. Retrieved November 20, 2014, from http://www.econ.wisc.edu/~aseshadr/working_pdf/humancapital.pdf Top of Form Bottom of Form Pritzker, P., Doms, M., & Moyes, B. (2014, October 1). Retrieved November 20, 2014, from http://www.bea.gov/national/pdf/nipa_primer.pdf Read More