4.3.1 - Measures of Development

Question 1

Define Economic Growth

Answer 1

. A rise in a country’s productive capacity

. This means a rise in GDP or real national income

Question 2

Define Economic Development

Answer 2

. Improvement in economic and social opportunities

. An increase in quality of life and living standards

Question 3

Is there a difference between economic growth and economic development?

Answer 3

YES

Question 4

Classification of Countries

Answer 4

. BRIC
. TIGER
. HIC, NEEs, LIC
. MINT

Question 5

BRIC

Answer 5

Large countries with high growth prospects :

Brazil
Russia
India
China

Question 6

TIGER

Answer 6

Booming Economies in Asia:

Singapore
Hong Kong
South Korea
Taiwan

Question 7

MINT

Answer 7

Large population with economic growth and developing middle class

Mexico
Indonesia
Nigeria
Turkey

Question 8

Characteristics of Developing Countries

Answer 8

. Low income per capita

. Low levels of human capital (less education and training.)

. Rapid urbanisation and rural - urban migration

. Low levels of productivity

. Low life expectancy and high infant mortality rate. There is younger average age and fast growing population

. Large share of population in rural area with high agricultural sector

Question 9

Name SIX Measures of Economic Development

Answer 9

. Human Development Index (HDI)

. % of adult male and female in agriculture

. Economic Indicators (GDP, GNI)

. Gini Coefficient

. Number of mobile phones per 1,0000

. Access to clean water

. Genuine Progress Indicator (GPI)

Question 10

Explain HDI

Answer 10

. Scale from 0 to 1, which 0 being no development and 1 being complete development

. HDI has three equally weighted indicators of development:

. Health, measured in life expectancy

. Income, measured in GNI per capita

. education, measured by average years of schooling

Question 11

Explain Economic Indicators (GDP, GNI)

Answer 11

. National income can indicate how developed a country is.

.But it may not be accurate as there may be a lot of inequality in this country.

A large economy may not have high living standards and quality of life, for example China

Question 12

Explain Gini Coefficient

Answer 12

Gini Coefficient measures is used to measure inequality, which is used for measuring economic development

Range from 0 to 1, with 0 representing perfect equality and 1 representing total inequality

Less developed countries have higher inequality

Question 13

Disadvantages of HDI

Answer 13

1.) HDI is for the whole of a country, thus doesn’t distinguish between different rates of development within a country. (e.g. urban and rural parts). This is evident in China where the North is poorer than South. For example, GNI per capita is calculated per population or country so it does not show the inequality between different regions.

2.) HDI only comprising of three areas of development could be argued to be quite narrow as development consists of factors such as freedom, crime, gender equality, etc. This could mean a misallocation of resources and may lead to aid money directed to areas that are not in utmost need

3.) High national wealth (GNI) may not always mean high economic welfare. It depends how the money is spent. For example, if a country spends on military - this is reflected in higher GNI, but welfare could actually be lower

4.) Schooling, healthcare and income are weighted equally in the HDI which could be argued to be arbitrary especially if its clear that a certain area such as healthcare is lacking more than another. This makes it harder to efficiently allocate funds and may lead to aid money directed to areas that are not in utmost need

• ALL of these disadvantages would lead to a misallocation of funds may lead to aid money directed to areas that are not in utmost needed

Question 14

Explain Genuine Progress Indicator (GPI)

Answer 14

. Measure of economic development

. GPI starts with GDP as base but takes into account environmental and social factors such as:

Pollution, poverty rates and crime rates

. GPI suggests as GDP increases, economic development also improves

Question 15

Advantages of using HDI

Answer 15

. It uses two types of social data (life expectancy and education) and one type of economic data (GNI), which means that the measure uses a broad range of information, which will lead to a more accurate result

. Updated annually so it can be used to show temporal change and shows progress. This can be used to inform governments which policies are most effective in increasing HDI and economic development.

. HDI informs us which countries need foreign aid and tells us where the resources should be allocated. This could then be used to increase economic development.

Question 16

Issues with single indicator of economic development

e.g. GDP or GNI per capita, Gini coefficient, access to clean water, etc.

Answer 16

(refer to 2.1.1 Economic Growth for issues with GDP per capita)

. Single indicator of economic development are not broad enough. There may be other factors that contribute to economic development and standard of living.