1-Mention at least three limitations of GDP when it is considered as a measure of economic performance or as a measure of human welfare

-Leisure

-Home production

-Environmental changes

2-what are the drawback of price indexes when they are used for discounting to access the growth in living standard

-Quality changes

-New product

-Substitution

3-what are the main part of wealth according to the world bank wealth of nation projects

-Produced capital

-National Capital

-Intangible capital

-Social welfare

-Education level

4- In class we talked about William Nordhaus’s estimation of the change in the price of light. Which drawback of price indexes does this example illustrate and why? Why is it important when assessing economic development?

- The bottom line of the William nordhaus estimation of the change in the price of light hinges on the fact that traditional price indexes of the lighting vastly overstates the increase in lighting prices the last two centuries and the true rise in living standard in this sector has consequently been vastly understated.

5- What is the magnitude of difference between the per capita income of the average low income country and the per capita income of the average high income country today? Has this difference always been this large? If not, when did the gap begin to grow?

- When comparing country income levels there are several differences that can be found between each group, listed in order of examination they are GNP per capita, political stability, life expectancy, and access to education, technological level

6- What are the measures that are avaraged to arrive at the Human Development Index? Why are these considered to be important?

- The first Human Development Report introduced a new way of measuring development by combining indicators of life expectancy, educational attainment and income into a composite human development index, the HDI. The breakthrough for the HDI was the creation of a single statistic which was to serve as a frame of reference for both social and economic development. The HDI sets a minimum and a maximum for each dimension, called goalposts, and then shows where each country stands in relation to these goalposts, expressed as a value between 0 and 1

7-What are the five areas of economic freedom according to the Fraser Institute? Give an example of a variable that is taken into account in each case.

- Personal choice, voluntary exchange, freedom to compete, protection of person and property

- Institutions and policies are consistent with economic freedom when they provide an infrastructure for voluntary exchange, and protect individuals and their property from aggressors seeking to use violence, coercion, and fraud to seize things that do not belong to them.

-The variables are legal structure, sound money and protection of people and properties

8- Explain why the maximum level of economic freedom does not mean zero government intervention.

- There are 24 components in this year’s index. Many of those components are themselves made up of several sub-components. In total, the index comprises 42 distinct variables. The database covers 144 countries.

- Each component and subcomponent is placed on a zero-to-ten scale that reflects the distribution of the underlying data. The component ratings within each area are averaged to derive ratings for each of the five areas. The summary rating is merely the average of the five area ratings.

9- What does it mean that political and civil liberties havee an instrumental role in economic development?

- Their direct importance in human living associated with basic capabilities (including that of political and social participation)

- Their instrumental role in enhancing the hearing that people get in expressing and supporting their claims to political attention (including the claims of economic needs)

- Their constructive role in the conceptualization of "needs" (including the understanding of "economic needs" in a social context).

10- What are institutions and why do they matter?

-institutions are the rule of the game in a society or, more formally, are the humanly devised constraints that shape human interaction.

- why do institution matter ? TRANSACTION COSTS – businessmen in deciding on their ways of doing business and on what to produce have to take into account transaction costs.if the cost of making an exchange are greater than the gains which that exchange would bring, that exchange would not take place and the greater production that would flow from specialization would not be realized. In this way transaction costs affect not only contractual arangement, but also what goods and services are produced

11- The methodology of exploring the determinants of welfare:

12- cross-country regressions

13- economic freedom ?

-empowerment of the individual: each person controls the fruit of his or her own labour initaitive

-non discrimination:in an economically free society, individuals succed or fall based on their individual effort and ability

-open competition: in an econmically free society, the power of economic decision making is widely dispersed, and the allocattion of resources for production and consumption is on the basis of free and open competition so that every individual or firm has a fair chance to succeed.

14- The World Bank’s Worldwide Governance Indicators Project, Why political institutions matter

15- Political rights and civil liberties