5 Economic development

Question 1

Indicators

Answer 1

Used to assess progress in the living standards of a country.

Question 2

Living standards

Answer 2

Refers to the level of wealth, comfort, material goods and necessities available to a certain socioeconomic class or geographic area.

Question 3

Adult literacy rates

Answer 3

The proportion of the adult population that is able to read and write.

Question 4

Real GDP per head

Answer 4

Measures the average income per person in a country.

Question 5

The Human Development Index
What does it do

Answer 5

‘The HDI (Human Development Index) was created to emphasize that people and their capabilities should be the ultimate criteria for assessing the development of a country, not economic growth alone.’

Question 6

The HDI measures three key dimensions of human development:

Answer 6

A decent standard of living, measured by GDP per head.
A long and healthy life, measured as life expectancy at birth.
Access to knowledge, measured by mean and expected years of schooling.

Question 7

Problems with Real GDP per head

Answer 7

Real GDP per person does not take into account what people can buy with their income.
A higher output may be due to increases in the number of working hours or worsening working conditions that lower rather than improve the standard of people’s lives.
Increases in real GDP per head may be due to increases in the production of weapons and military equipment, which may actually reduce the quality of people’s lives.
Real GDP per head also excludes unpaid work that people do for charities or voluntary organisations, which then understates the total output and well-being of the country.
Real GDP per head is an average and so tells us nothing about how any extra income earned is shared.

Question 8

Limitations of the HDI

Answer 8

The HDI assumes that income is distributed evenly but there may be differences in income between different groups, such as between men and women.
The HDI also ignores human rights and gender inequalities, which can have a considerable impact on people’s well-being.
HDI does not measure increases in daily commutes to and from work, the range of working conditions, or the severity of environmental impacts such as resource depletion and pollution.

Question 9

Comparing living standards: Investment in infrastructure

Answer 9

Regions and countries with good road, rail and communication networks are more attractive to businesses, which increases job prospects for people in those areas. This can improve their income and living standards.

Question 10

Comparing living standards: Distribution of income within a household

Answer 10

The distribution of income depends on the composition of earners within a household. Households with two or more people working will usually earn a higher income than a household with one person working. Full-time workers typically earn more than part-time workers.

Question 11

Comparing living standards: The general price level

Answer 11

The cost of living in one region or country may be more expensive than another, which will influence wages. Wages tend to be higher when the cost of living is higher.

Question 12

Comparing living standards: Education

Answer 12

Highly skilled workers are more likely to be in high demand, and as a result their earning potential can be higher. This will increase the standard of living.

Question 13

Comparing living standards: Healthcare

Answer 13

Access to healthcare can help people to become healthier and more productive, which allows them to earn more wages.

Question 14

Comparing living standards: Wealth

Answer 14

The amount of wealth a person holds can improve their standard of living. Wealth is the stock of assets that have a monetary value. This includes houses, jewellery and shares in companies, many of which can be sold for cash. Wealth can also be through inheritance (money or objects that someone gives you when they die), entrepreneurial skills or savings. Some people have a considerable amount of wealth, while others have none. Households who have accumulated (collected over a long period of time) wealth can live on the income earned from their wealth and in some cases this adds to their earned income.

Question 15

How is Standard of living measured

Answer 15

Literacy rates
CPI
Distribution of income
Jobs: in different sectors

Question 16

Poverty

Answer 16

Poverty is an inability to meet basic needs because food, clean drinking water, proper sanitation, shelter, education, healthcare and other social services are inaccessible. Poverty is when people cannot sustain a basic standard of living.

Question 17

Relative poverty

Answer 17

When people cannot sustain the same standard of living as others in the same society.

Question 18

Absolute poverty

Answer 18

When people earn at or below 1.90 USD per day and cannot fulfill the most basic needs necessary for survival.

Question 19

The causes of poverty
10

Answer 19

POVERTY TRAP
Unemployment
Low wages
Illness
Age
Population growth
Poor infrastructure
Dependence on commodity exports
Lack of foreign direct investment (FDI)
High public debt

Question 20

Foreign direct exchange

Answer 20

Foreign capital injected into a domestic economy to purchase tools and services used to produce goods and services.

Question 21

Policies to alleviate poverty and redistribute income
6

Answer 21

Sustainable Development Goals (SDG)
Reducing unemployment
Progressive taxation
Providing state benefits
Improving education
Introducing or increasing the minimum wage

Question 22

Factors that affect population growth

Answer 22

The birth rate
The death rate
Net migration

Question 23

What influences birth rate

Answer 23

The birth rate of a country is influenced by the number of women in the population, the fertility rate (the average number of children per woman) , contraception, female employment, customs and religion.

Question 24

What influences Death rate

Answer 24

This is influenced by factors such as disease, income levels, living standards and nutrition.

Question 25

Reasons for different rates: Birth rate

Answer 25

Birth rates tend to be high in countries where the fertility rate is high, the infant mortality rate is high, and women are less educated and so tend to marry young. A lack of family planning and access to contraception also lead to high birth rates.

Countries where the cost of raising and educating children is expensive (where education is compulsory up to a certain age), and where women prioritise their careers and so choose to have children later in life, tend to have lower birth rates.

Question 26

Reasons for different rates: Death rate

Answer 26

A country is likely to have a relatively low death rate if the majority of people have a healthy diet, regular exercise, proper sanitation, good housing facilities, access to good-quality healthcare and education, and good working conditions. Countries at peace are also likely to have lower death rates than those at war.

Question 27

Reasons for different rates: Net migration

Answer 27

People leave (emigrate from) their home countries for many different reasons, such as better job opportunities, a better lifestyle, warmer climates, lower taxes or to seek refuge from conflict.

Question 28

Effects of changes in the size and structure of population on different countries

Answer 28

Age distribution
Gender distribution
Optimum population

Question 29

Optimum population

Answer 29

The size of population where the output of goods and services per head of population is maximised.

Question 30

How does changes in size and structure of population change: Firms

Answer 30

In 2018, 28% of people in Japan were aged 65+. An ageing population reduces the supply of labour to firms.

On the other hand, a combination of high birth rates and net immigration will increase the supply of workers in a country.

Question 31

How does changes in size and structure of population change: Government

Answer 31

A growing population can mean an increase in the birth rate, a decrease in the death rate and an increase in net immigration.

An increase in net immigration means that the government can collect more tax revenues. But at the same time, an increase in the birth rate increases the government’s spending. For example, in Australia, the government pays up to 18 weeks at minimum wage level to the primary carer of a newborn. More babies means the government has to spend more on supporting their carers.

Question 32

How does changes in size and structure of population change: The economy

Answer 32

Population growth increases the demand for scarce resources within a country. If a country cannot produce enough goods and services to match growing demand then this can lead to an increase in imports, which can lead to inflationary pressure.

Question 33

How does changes in size and structure of population change: The environment

Answer 33

An increase in the number of people in a country can increase the level of pollution and traffic, as well as the rate at which non-renewable resources are depleted.

Question 34

How does changes in size and structure of population change: Consumers (what they consume)

Answer 34

Spending patterns will vary within a country depending on the age and gender distribution.
A country with a very young population will see consumers spend a larger portion of their income on childcare, education, housing and toys.
If a country has an older population, consumers will spend more on healthcare and related costs.
Firms and governments need to ensure there is sufficient supply of goods and services to meet this demand.

Question 35

Economic development

Answer 35

Occurs when increases in income and output per capita are accompanied by improvements in the living standards of the population.

Question 36

How is economic development achieved

Answer 36

Increasing incomes and output

Redistributing income so that the gap between the very rich and very poor is reduced

Reducing unemployment

Increasing the provision of essential goods and services such as food, shelter, education and healthcare.

Question 37

How to measure economic development

Answer 37

Real GDP per capita: but this does not take into account living standards within the country

Human Development Index:
A decent standard of living, measured by GDP per capita.

A long and healthy life, measured as life expectancy at birth.

Access to knowledge, measured by mean and expected years of schooling.

Question 38

Factors that cause different rates of economic development

Answer 38

Differences in income
Productivity
Population growth
Size of the primary, secondary and tertiary sectors
Differences in saving and investment
Education and healthcare