3.1.2 - Measuring Economic Development Flashcards
Define economic development
The improvement of the well-being of a country’s citizens over time.
List the three characteristics of economic development
- Rising household incomes
- Falling levels of poverty
- Increased provision of public services
Define purchase power parity (PPP)
The PPP is a long term exchange rate calculated by considering the ratio of prices in one country compared to another.
List the four problems of using GNI per capita to measure economic development.
- Income distribution
- The nature of goods produced
- Changes in quality over time
- Non - monetary factors
Why is income distribution a problem when measuring economic development using GNI per capita?
GNI per capita is an average and therefore does not account for income disparity.
Why is the nature of goods produced a problem when measuring economic development using GNI per capita?
Some goods produced and consumed add more welfare to a country than others. A country that produces more necessity goods rather than luxury goods will arguably have a higher levels of welfare than a country that produces a higher proportion of luxury.
Why is a change in quality over time a problem when measuring economic development using GNI per capita?
The quality of goods produced by an economy improves over time.
Why are non-monetary a problem when measuring economic development using GNI per capita?
Some factors add to welfare but cannot be quantified in monetary terms:
- Crime rates
- Leisure time
- Mental health
What are the four alternative methods of measuring economic growth?
- Human development index
- OECD better life index
- World happiness report
- Happy planet index
