4.1 Economic Development

Question 1

What is economic growth?

Answer 1

Economic growth is the increase in the value of real GDP per capita over time. It is therefore a quantitative variable of economic wellbeing.

Question 2

What is the definition economic development?

Answer 2

Economic development includes economic growth in addition to qualitative determinants of quality of life eg a reduction in poverty, income inequality, gender inequality, political oppression and unemployment.

Question 3

What is economic development?

Answer 3

Economic development is an intangible concept that considers qualitative variables. It is multidimensional encompassing factors that raise the general standard of living in a country eg political freedom, reduced income inequalities, greater self esteem and the reduction of poverty.

Question 4

What is the relationship between economic growth and economic development?

Answer 4

There is a positive relationship between a countries economic growth and its economics development ie. the wealthier a country is the higher its standards of living.

Question 5

What are some negative consequences of economic growth?

Answer 5

It is possible for some people to live happier lives in the absence of higher incomes as economic grow can bring about negative consequences such as pollution, climate change and environmental damage.

Question 6

Why does economic growth not always lead to economic development?

Answer 6

Economic growth does not always lead to a higher standard of living for the majority of people, so there s no economic development in such cases.

Question 7

What is a negative consequence of economic growth?

Answer 7

Can lead to greater income inequality.

Question 8

How can economic growth but not development be caused?

Answer 8

By productivity gains caused by the increased use of technology and automation - but this results in technological unemployment so economic growth does not necessarily lead to economic development.

Question 9

Why is economic growth usually needed over long term periods to cause economic development?

Answer 9

To meet their infinite wants people need to earn more income.

Question 10

Why do economist prefer to use real GDP per capita fugues rather than real GNP per capita as a measure of growth and development in less economically developed countries?

Answer 10

Because real GDP per capita measures the national income earned within the border of the LEDC.

Question 11

What is sustainable economic development?

Answer 11

Refers to development that meets the needs of the present generation without compromising the ability of future generation to meet their needs.

Question 12

What are sources of economic growth and development in LEDCs?

Answer 12

An increase in the quantity and quality of physical capital through FDI this helps to create jobs and to boost the productive capacity of the economy.
An increase in the quantity and quality of human capital through improved education and healthcare to boost the productivity of the labour force.
The development and adoption of technology that is appropriate to the context of the LEDC.
Institutional changes to the banking, legal and political systems of the country to enable economic transaction to be carried out with relative ease.

Question 13

Why are the source of economic growth and development needed in the LEDC?

Answer 13

Required to facilitate trade, attract FDI and boost both consumer and business confidence.

Question 14

What are common characteristics of LEDCs?

Answer 14

Low levels of GDP per capita
High levels of poverty
Relatively large agricultural sectors
Large urban informal sectors 
High birth rates

Question 15

Why do LEDCs have low levels of GDP per capita?

Answer 15

Thy have low national income per capita of the population partly due to their relatively low GDP and partly due to their relatively high birth rate.

Question 16

What is the problem with LEDCs having large agricultural sectors?

Answer 16

The income elasticity of demand for agricultural products is relatively low making it difficult for LEDCs to develop.

Question 17

Why is the large informal sectors in LEDCs important?

Answer 17

important for many peoples survival and accounts for a large proportion of employment in urban areas.

Question 18

Why is the high birth rates in LEDCs a problem?

Answer 18

They experience low rates fo economic growth but suffer from high rates of population so this will tend to cause a fall in the GDP per capita thus limiting economic development.

Question 19

What is the poverty trap?

Answer 19

A vicious cycle of poverty causing greater poverty. Low income earners spend most if not all of their income on meeting their essential needs so they have insufficient funds to invest in their future and are trapped in poverty.

Question 20

Why will low levels of GDP per capita tend to cause LEDCs to suffer from a low savings ratio?

Answer 20

Countries have limited funds from savings for investment expenditure thereby hindering their future productive capacity and economic development.

Question 21

Why are low income countries often unable to break the poverty cycle?

Answer 21

They have little if any savings to fund the necessary investment in factors needed for economic development. These include: physical capital, human capital and natural capital.

Question 22

Why is not having the money to invest in human capital bad?

Answer 22

It leads to low levels of education and skills and poor health. This will have an impact on rates of infant mortality, maternal mortality and life expectancy.

Question 23

Why is not having the money to invest in natural capital bad?

Answer 23

The stock of indispensable natural resources from the Earths ecosystems will be depleted and will not be replenished without the necessary capital investments.

Question 24

Why do low income households struggle to break the cycle?

Answer 24

Because banks are unlikely to lend money to very poor families as there is a high risk of them defaulting on their loans.

Question 25

Why is poverty transmitted from generation to generation a bad thing?

Answer 25

It leads to malnutrition and a physically weak labour force.

Question 26

Why is government intervention needed in regards to the poverty cycle?

Answer 26

Needed to bring people to of extreme poverty, if a country is so poor that it cannot afford government intervention then it will need to rely on foreign aid.

Question 27

What are some differences between LEDCs?

Answer 27

Resource endowment - countries have different quantities and qualities of natural resources.
History - Many LEDCs were former colonies of counties, colonisation often mean wealthier countries extracting marketable resources from LEDCs rather than investing in the countries for economic development.
Political systems - LEDCs have a range of political systems including dictatorship and democracy.
Political stability - political turmoil and corruption can hinder economic development.
Climate - LEDCs have varying weather conditions which can directly impact on production, agricultural output is clearly dependent on the climate but climate can also affect peoples productivity levels in other economic activities.
Population - whilst LEDCs tend to have large or growing populations others do not.

Question 28

What are millennium development goals of the united nations?

Answer 28

Consists of eight international anti poverty development target to be achieved by all 193 UN member countries by 2015.

Question 29

What are positives for the goals?

Answer 29

The goals address the needs of people in both developed and developing countries emphasising that no one should be left behind. The agenda addresses the three dimensions of sustainable development, social, economic and environmental as well as aspects related to peace, justice and effective institutions.

Question 30

What are the eight goals>

Answer 30

To eradicate extreme poverty and hunger
Achieve universal primary education
Promote gender equality and empower women
Reduce child mortality
Improve maternal health
Combat HIV/AIDS, malaria and other diseases
Ensure environmental sustainability
Develop a global partnership for development.