Reference no: EM132476482

Many developing countries depend on natural resources for much of their income and employment. When a forest is cut down in Costa Rica, the output is sold, and if we look only at GDP figures, the economy appears to be growing richer. But what if the trees are not replaced so that their removal results in flooding, soil erosion, and loss of fuel and food by the indigenous population? Robert Repetoo of the World Resources Institute in Washington, D.C., has recalculated GDP in Costa Rica to reflect the impact of resource depletion. His figures show that within the forestry sector itself, net forestry product -- after resource delpetion is calculated -- was actually negative through most of the 1980s. Repetoo argues that such statistics are important because they educate the devloping countries and show them that their natural wealth is not limitless. He wants the United Nations to take into account the depletion of natural resources when calculating each nation's GDP. He points out that currently a benefit from commecial forests is recorded only when trees are cut down.

For Critical Analysis:

In the United States there are actually more trees in our forests than there were 50 years ago. Does this mean that we should be adding to our GDP figures for this increase in our forests?

Comment on the following two questions for thought:

How would a sudden jump in U.S. prices affect (a) imports from Mexico, (b) exports to Mexico, (c) U.S. aggregate demand?

What exactly did Say mean when he said "supply creates its own demand"? Do you agree or do you think "demand creates its own supply"?