Jan 23, 2017

Answers to Questions
1. So what is the Pattern of development among countries?
What I gather is that the pattern of development is not the same among countries. Or at
least not exactly the same. But since its a pattern, that means that it should be found
across majority of them. One pattern of development is that countries shift from
agricultural to an industrial country. Of course, another question remains: why does a
shift to an industrial economy lead to economic development? I dont know. Yet. I start
with the concept about value being an agreement among people. For instance, the
value of an iPhone is expensive during the first time it was released in 2005. It was
expensive because a lot of people wanted to have an iPhone, in other words demand
was high. And where demand is high, price is high. The high demand is a reflection of
how the iPhone was valued in 2005. It was highly valued. With this starting point, how
does one explain why industrialization leads to an improvement in economic
development? Could it be because of specialization? Because specialization improves
efficiency, output increases, and so commodities become cheaper? As commodities
become cheaper, more people can afford them, and so more experience an
improvement in their standard of living. At the same time, high demand brings profits to
businesses which are responsible in injecting more investments and more job creation.
2. Why is it important to properly name the classification of countries in terms of their
economic development?
Well, in any branch of science, classification and categorization is ubiquitous. This is
because classifying makes it easier to observe samples and make hypotheses,
experiment, and draw conclusions. And its supported by the logic that similar or
identical things have the same characteristics. And so, grouping countries with the same
characteristics follows the same principle.
3. How does one use the PPP?
The Purchasing Power Parity is a method of accounting in order to compare the same
basket of goods and services across different countries. This is necessary because
countries have different currencies. In terms of the Exchange Rate, it is insufficient
because it takes into account all the factors that are not necessarily relevant and
perhaps some that should not be included if we are to compare one particular basket of
commodities across one country and another. For example, the dollar may be high
relative to a currency caused by a particular demand in a certain commodity that is not
related to the commodity in question.