Development

Question 1

Development

Answer 1

The increase in real GDP and improvemnt in inhabitants living conditions

Question 2

Economic growth in developed countries

Answer 2

• may not be significant as people can already afford basic needs and wants
• inflation may increase more as people buying more goods
• may have to work more hours which decreases the quality of life
• people buying more luxury goods such as cars which increases pollution levels

Question 3

Economic growth in developing countries

Answer 3

• really important as they dont have a welfare state
• more income and can meet needs and wants
• can now send their children to school so gain more skills
• standards of living increases

Question 4

Relationship between economic growth and development

Answer 4

As economic growth increases, development increases

Question 5

The Easterlin Paradox

Answer 5

Argues that although there is a correlation between level of income and level of happiness that it does not mean that happiness increases in line with economic growth

Question 6

What is the Paradox?

Answer 6

• rich people tend to be happier than poor people but as the country as a whole gets richer, happiness does not increase

Question 7

What are individuals primarily concerned about?

Answer 7

They are concerned about their relative income, which is the income compared to people in their Society
- if you are poor in the UK you compare to how rich someone is in the UK
- so people are not necessarily happy as keep comparing income to someone who is richer

Question 8

The structure of an economy

Answer 8

1. Primary
- extracting raw materials and fop

2. Secondary
- producing and making the goods using the raw materials

3. Tertiary
- only provide services and not physical goods

Question 9

Causes of the kuznets curve

Answer 9

1. Deindustrialisation
- as move from primary sector to secondary sector there is high environmental deterioration
- however from secondary to tertiary sector there is lots of deindustrialization

2. Improved technology
- can now afford to invest in research and development
- advanced technology means you use less raw materials

3. Greater awareness
- as standards of living increases it becomes politically popular to focus on reducing emissions

Question 10

Criticisms of the kuznets curve

Answer 10

• buy more cars with more money so pollution increases
• need industrialisation to get from primary to tertiary sector
• importing goods from other countries which causes environmental degradation
• as incomes increase, people start importing more and may go on more holidays

Question 11

Why do developing countries struggle to move from primary to tertiary sector?

Answer 11

Due to the lack of skills and money

Question 12

What is the drawback to being an agricultural based economy?

Answer 12

• exports are of low value and import are of high value so balance of payment deficit
• sensitive to exogenous shocks, such as natural disasters
• prices are very volatile

Question 13

Sustainable development

Answer 13

Meeting the needs and wants of the current generation without compromising the ability of meeting needs and wants of future generations

Question 14

Factors influencing growth and development

Answer 14

1. Techonology
- better quality tech so productivity increases and higher efficiency
- output increases
- need to hire workers to use tech so unemployment decreases

2. Level of unemployment
- if high levels of unemployment, high levels of absolute poverty
- consumption decreases as less RDY so economic growth decreases

3. Infrastructure
- higher geographical mobility so more productive at work and make less mistakes

4. Education and Training
- if education and training higher people have more transferrable skills and more occupationally mobile
- more productive and produce more output
- even if lose their job they can easily find another

5. Distribution of income
- if high levels of income inequality, less opportunities for the poor
- intergenerational poverty increases

6. Financial institutions
- allows firms to take out loans to invest which increases productive capacity
- allows consumers to take out money and consume

7. Political constitution factors
- beneficial if there is no corrupt government as will invest into welfare

Question 15

GNI Per Capita (PPP)

Answer 15

GDP and net income from abraod expressed as an average per person

Question 16

Advantages of GNI per capita

Answer 16

• includes remittances which is money sent back to home countries
• PPP takes into account the cost of living so takes into how much you can actually buy with the money in that country
• Closes the gap between rich and poor countries
• Can incentivize fdi to invest into the country as when they are adjusted to PPP they are not as undeveloped as they seem

Question 17

Disadvantages of GNI per capita

Answer 17

• not telling the distribution of income across the country so does not take into consideration income iequality
• some economic activity not recorded in developing countries so informal sector not included

Question 18

Human development index

Answer 18

A composite measure between 0 and 1 that has three components
- life expectancy at birth, mean years of schooling for 24 year olds and expected children, GNI per capita

Question 19

Advantages of HDI

Answer 19

1. Mean years of school
- includes how many people are schooled and how many people more likely to be skilled
- so if there’s more skilled jobs and higher paying jobs shows development

2. Life expectancy
- shows the level of healthcare in the economy
- good health care means better quality of life which shows greater development as the government is spending on welfare

3. GNI per capita
- shows how much income individuals have especially in developing nations who receive remittances from abroad
- more money and income means better standard of living as combine more goods and services

4. Easy and efficient
- allows international comparisons to be made as even developing countries are likely to have HDI indicators
- can help reduce poverty around the world as aware that another country have low HDI

5. Outcome-based rather than expenditure based
- Allows distortion to be eliminated as if you only look at the GDP of a country you could think that they are really developed when it is actually not

Question 20

Disadvantages of HDI

Answer 20

• does not take into account quality of healthcare and education
• low quality investments into healthcare and education not effective
• don’t know the distribution of education and healthcare as higher income households may have higher years and able to access better health care
• weighting of indicators may not be equal
• some countries may just invest into one component of the indicator and pump a lot of money into that area
• large opportunity cost
• only considers three factors which means it is too narrow

Question 21

The Genuine Progress Indicator

Answer 21

A more comprehensive measure of economic development calculated from 26 different indicators, grouped into three categories

• Economic, Environmental, Social

Question 22

Advantages of GPI

Answer 22

1. Much more complete measure
- considers a larger range of factors that are going to impact welfare such as pollution

2. Broad indicator
- encourages policy makers to improve invest and look into other factors that will improve infrastructure that has not got to do with income
- Beneficial as GDP is misleading about welfare, as having more money does not mean better standard of living

Question 23

Disadvantages of GPI

Answer 23

1. Difficult to collect data
- there is a lot of indicators to take into consideration
- measuring is very subjective so accuracy is difficult
- a lot of indicators are value-based so varies from country to country
- includes collecting normative data
- time consuming and expensive
- comparing data is a lot harder

2. Not useful for judging the state of the business cycle

3. Indicators of value-based so subjective

4. Time consuming and expensive