Mankiw Principle Of Economics Analysis

1) Overview of the Mankiw’s Principle of Economics.

Chapter 26, in Mankiw’s Principle of economics, mainly discuss about productivity. Mankiw denotes that the productivity itself is the key determinant of growth in living standards. The productivity embodying the nation’s ability to spend money on determinants of welfare, productivity shares somewhat proportionate relationship with the country’s welfare or standard of living. The concept of productivity is important because it provides chances to view the problems of Venezuela’s economy more specifically. The productivity is determined by several factors: Physical capital, Human capital, Natural Resources, Technological Knowledge. The lists are the result of considering the factors that possess

During the Chavez’s regime key items such as, medicine and food were reduced. Goods were still affordable but below the cost of production. Firms were expropriated, and the government limited access on dollars in order to prevent people from changing Volivards to dollars. Due to the restrictions on Venezuela’s economy, the market malfunction making firms unprofitable to produce goods. As the country experienced shortage in goods, the government relied on the oil revenue. By using the oli revenue Venezuela offset the shortage. The problem was that oil sales were the only solution to stabilize their economic. In other words they were considerably dependent on oil sales. As the oil price fell, the government weren’t able to solve the shortage of goods. Along the fall in oil prices the money circulation stopped. To solve this problem the government printed more money inducing

Such investments on field of science or technology, lacked. Science or technology provide countries to improve their high dependency on oil by selling technology itself. The best example would be Saudi Arabia. Saudi Arabia one of the country with the most oil reserves, have invested foreign countries engineers, schools, and academic institutions to participate to develop such technology and giving immense amount of money, mostly earned by oil sales. This kinds of investments lacked in Venezuela.

4) Analysis of Venezuela’s economic crisis (applying the notions that we’ve learned in class.

Now viewing the Venezuela’s economy by using the concept of productivity, Venezuela managed to allocate the Physical capital and human capital well. Although they were dependent on the natural resources and failed in managing the technological knowledge.

Venezuela’s education, which relate to human capital, were considered high-leveled in the past. According to the Borgin Magazine they were even named as the bright light of Latin America. The base of their high education came from Hugo Chaves’s regime. Hugo Chavez focused on education projects purposed on spreading literacy, so that citizens could participate in education. This led Venezuela to be placed in the fifth among the nations for a percentage of population enrolled in higher education. Due to high education human capital was considered