Europe s Ame Natural Resources, Capital Goods, Human Capital, & Entrepreneurship
STANDARDS: SS6E9 Describe factors that influence economic growth and examine their presence or absence in the United Kingdom, Germany, and Russia. a. Evaluate how literacy rates affect the standard of living. b. Explain the relationship between investment in human capital goods (education and training) and gross domestic product (GDP per capita). c. Explain the relationship between investment in capital (factories, machinery, and technology) and gross domestic product (GDP per capita). d. Describe the role of natural resources in a country s economy. e. Describe the role of entrepreneurship.
Economists measure the health of a country s economy by its gross domestic product (GDP). A country s GDP is the total dollar value of all goods and services produced in one year. Some countries have a high GDP, while others do not.
GDP is often measured as GDP per capita (per person). Countries with a higher GDP per capita have stronger economies, while countries with lower GDP per capita have weaker economies. A nation s productive resources determine the strength of its economy.
Productive resources are the materials and labor used to create goods and services. The four main categories of productive resources are natural resources, human capital, capital goods, and entrepreneurship. Brain Wrinkles
Natural resources are the materials that come from nature, such as land, forests, minerals, water, etc. They play an important role in a country s economy because they are fuel for industry and are a source of income when exported to other countries.
Timber Logs
Capital goods are the man-made materials that are needed to produce goods and services. The more a country invests in its capital goods, the stronger its economy and higher the GDP. Some examples of capital goods include factories, machinery, technology, buildings, tools, etc. Brain Wrinkles
Investment in better machines, updated factories, and new technology leads to more goods and services being produced. This boosts a country s exports and its gross domestic product. Investment in capital goods typically leads to an increase in GDP.
Some of a country s most important resources are its people. Countries need skilled workers to fill jobs within the economy. It takes different kinds of human capital to make different kinds of goods and services. For example, doctors, teachers, and factory workers all have a different set of skills and they each help to produce different goods or services.
Investments in human capital, such as education and professional training programs are a great way for a country to improve its GDP. In order to have long-lasting economic growth, a country must have a smart, highly-skilled workforce. Education also improves a country s standard of living. Brain Wrinkles
A country s literacy rate is the percentage of adults who can read and write. Countries with high literacy rates enjoy a high standard of living (the level of wealth and material comfort available). Educated and skilled workers are an important factor in a country s economic growth.
If you can read, you can learn and improve your work skills to get a better job that pays a higher salary. With a better salary, you can improve your standard of living. A country that improves the literacy rate among its citizens will also improve the standard of living and economy.
An entrepreneur is someone who takes risks to start a new businesses. Entrepreneurs come up with fresh ideas for goods or services and then they use natural resources, capital goods, and human capital to bring those ideas to life. They help the economy grow by opening new businesses and developing new products, which creates more jobs.
Talk Show Host & Medial Mogul Oprah Winfrey Brain Wrinkles
It is risky and expensive to be an entrepreneur because they often invest their own money (or borrow it) to start their business. There is no guarantee of success, and if the business fails, they could lose money. Some countries encourage entrepreneurship by trying to reduce the risk and expense. Brain Wrinkles
Factors of Economic Growth in
Many European nations have industrialized economies that produce valuable goods and services. This has caused the countries in Europe to have a high GDP per capita and a high standard of living. Western European countries tend to have a higher GDP and standard of living than countries in Eastern Europe.
GDP per Capita France $41,180 Germany $46,893 Italy $35,708 Russia $25,410 Spain $34,819 Ukraine $7,970 United Kingdom $41,180
United Kingdom Germany Russia Coal Coal Forests Iron ore Iron ore Diamonds Oil Fertile soil Oil Fish Natural gas Natural gas Natural Harbors Rivers Gold
Russian Diamond Mine
The availability of natural resources in a country greatly affects which industries develop there. Because of its fertile soil, Germany is best suited for producing agricultural goods. Shipping and fishing is a major industry in the UK. Brain Wrinkles
Largest Organic Farm in Germany
Germany and the United Kingdom have both made strong investments in human capital. Both countries provide public education and they have a 99% literacy rate. Colleges and vocational schools train citizens to be productive members of the workforce.
Oxford University in England
Germany and the United Kingdom are also good examples of how investments in capital goods can lead to economic strength. Each year, they invest billions of dollars into new technology, updating factories, and maintaining infrastructure. Investments in capital goods and human capital have contributed to high GDP per capita in Germany and the UK.
German Automobile Factory
Nce teh Since the fall of the Soviet Union in 1991, Russia has suffered many economic hardships. Under Communist rule, the government did not invest much money into capital goods or human capital.
Doll Factory in Russia
Nce teh As a result, Russia has been left with old factories and outdated technology. Despite having a literacy rate of 99%, much of the workforce was untrained and lacked the skills needed to boost the economy. Unemployment became a major problem that has led to slow economic growth for the country.
Nce teh Since the collapse of the Soviet Union, Russia has begun investing billions of dollars to update its factories and technology and to train its workforce. Even though Russia s economy has improved dramatically, its GDP per capita still remains lower than the other industrialized European nations.
An entrepreneur is someone who takes risks in order to start a new business. If a country s government imposes a lot of regulations on businesses, it can be really hard on an entrepreneur. For the most part, entrepreneurial activity is lower in Europe than in the US, Latin America, and Australia.
High taxes and strict business regulations have lowered overall business freedom in many European countries. In recent years, several countries have begun encouraging entrepreneurship by lowering taxes, decreasing the time it takes to start a business, and loosening regulations.
The UK has a higher level of entrepreneurship than Germany and Russia. Starting a new business takes Overall Business Freedom United Kingdom Germany Russia 5 days 11 days 10 days 90% 86% 74%
British billionaire author J.K. Rowling
1. What does gross domestic product mean? 2. What is a country s GDP divided by its population called? 3. Productive resources are used to make what? 4. Give an example for each category of productive resource: Natural Resources- Capital Goods- Human Capital- Entrepreneurship- 5. Which productive resource can be a source of income when exported? 6. When a country invests in education for its citizens, what is it increasing? 7. A country can increase its capital goods by investing in what? 8. Write a statement that describes the relationship between a country s investment in human capital and capital goods and its GDP: 9. How do entrepreneurs help a country s economy? 10. Write a statement that describes the relationship between a country s literacy rate and its standard of living: Brain Wrinkles