ECOS2025
Tutorial 3 (Week 3)
A team-based presentation will commence in Week 3. Questions marked * are to be used for a team-
based presentation.
Pre-tutorial Readings:
1) Review Week 1 & 2 lectures
2) International Monetary Fund (2011) “Did the Plaza Accord Cause Japan’s Lost Decades,” in Ch. 1,
World Economic Outlook, Washington, DC, International Monetary Fund, April, pp. 53-55.
http://www.imf.org/external/pubs/ft/weo/2011/01/pdf/text.pdf
3) MBN Market Business News, “What is the Plaza Accord? Definition and meaning”,
https://marketbusinessnews.com/plaza-accord-definition-meaning/
Discussion Questions
*1. ‘The rule of 70’ states that if a variable ‘X’ grows continuously at g% a year, then it will take
approximately 70/g years for the variable to double. The rule is derived from the following formula
for exponential growth, where Xt is the initial value of variable X in time t and Xt+n is the value of the
variable in n years.
Let’s do some data exercises. Click on the link: https://fred.stlouisfed.org/series/KORRGDPC showing
real GDP per capita for South Korea. Obtain real GDP per capita numbers in 1962 (Park Chung-hee era
started) and 2011. Also, click on the link: https://fred.stlouisfed.org/series/NYGDPPCAPKDCHN for
China, and obtain real GDP per capita data in 1978 (Deng Xiaoping era began) and 2020.
a. Using the above formula or the rule of 70, calculate the average annual growth rate (g) for the
two countries over the respective periods. How often did each country double its living
standards as measured by per capita real GDP?
b. Assume that these two economies instead grew at the rate of Australian growth of 1.6% over
the respective periods. What would the real GDP per capita have been at the end of 2011 and
2020, respectively, for South Korea and China?
*2. The Gini index or coefficient is a measure of income distribution, originally used by the World
Bank, and is used widely for measuring a country’s degree of income distribution. (See
https://en.wikipedia.org/wiki/Gini_coefficient )
Consider the following chart.
exp g nt n tX X
⋅
+ =
ECOS2025
a. What do you notice about the trends and patterns in South Korea’s Gini index? What would
explain the downward and upward movements in the index over the sample period? Do you
observe any global trend?
b. ‘Jay’, a hypothetical tutor, argues that “income distribution is far more equitable in the
Himalayan kingdom of Bhutan and North Korea than in the United States, and hence these
countries are socioeconomically more desirable than growth oriented East Asian economies.”
Critically evaluate his assertion.
*3. Why is ageing population a drag on an economy? What should Japan do to overcome the adverse
economic impact of an ageing population? Discuss.
4. Compare and contrast the Meiji liberal reforms against the reforms of the American Occupiers post
WWII.
5. Critically appraise the statement that “the Plaza Accord caused Japan’s Lost Decades”. Why or why
not?