In this chapter you will:

• Examine how GDP per capita differs across countries;

• Discover the extent of poverty in the world;

• Learn about why some countries are rich and others are poor;

• Be introduced to standard theories of economic growth;

• Learn why economic growth is a major objective of economic policy;

• Look at the relationship between economic growth and the satisfaction of needs and desires.

In the previous chapter you learned about economic accounting, and especially about the measurement of national income. This chapter is concerned with affluence and poverty in the world economy. Economic accounting, and other data, is used to consider differences in the extent to which human needs and desires are satisfied in various countries. The explanation of these differences is sought, and found to lie in different experiences in regard to economic growth. The determinants of economic growth are investigated using simple models. Economic growth is the means by which poverty can be alleviated, and there is no doubt that achieving it is very important in poor countries. It is widely believed that it is also an important objective in rich countries because it makes people happier. It turns out that beyond a certain level, increasing affluence does not do much to make people happier.

THE RICH AND THE POOR

We begin this chapter by looking at current variations in the level of national income per capita, GDP per capita, around the world, and at the extent of poverty.