Economic development Flashcards
Define what is meant by economic development
Economic development refers to improving the living standards of citizens of a country by reducing poverty and income inequality, giving citizens freedom of choice.
Economic growth can be an indicator of economic development, but since economic development encompasses cultural and social progress, economic growth may not always correspond with economic development
Give a detailed definition of economic development, using three criteria
- increase the availability and widen the distribution of basic necessities
- raise living standards through the provision of more jobs, better healthcare, new infrastructure, green energy, better education, greater attention to human values
- to increase freedom to choose - expanding range of economic and social choices available to citizens
define GDP
- the total value of all goods and services produced in a country in a year
Define GNI
the total value of all goods and services produced by a country in a year (GDP), plus the net receipts from abroad
what is the difference between GNI and GDP
GNI = GDP + net income from abroad, therefore the difference is the net income from abroad
Evaluate the extent to which changes in national income are a good indicator of changes in the level of development in a country
changes in national income ARE a good indicator of changes in levels of development:
- a change in national income may be a good indicator of changes in levels of development depending on the causes of the change in GDP
- it could be that an increase in GDP occurs because of an improvement in the quality/quantity of factors of production
- in this case, economic growth may lead to economic development, as it results in all consumers benefitting from better quality products, and potentially lower prices
changes in national income AREN’T a good indicator of changes in levels of development:
- the change in national income could be the result of a large technological improvement or discovery made in a particular sector, rather than any improvement in living standards of the population
- for instance, in 2020, Guyana’s GDP grew by 43.5%, due to the introduction of the oil sector, for which it has now become a significant exporter. However, in this case, changes in economic growth is a very poor indicator of changes in development, since the discovery of oil is likely to only benefit a very small minority of the population, i.e., shareholders and managers of companies controlling the extraction of oil. This shows how changes in national income may not be useful because the cause of the change is specific to a single industry. The change in GDP has not resulted in everyone in Guyana becoming better off, and having larger amounts of disposable income and higher standards of living
Define PPP
Purchasing Power Parity
- PPPs are the rates of currency conversion that equalise the purchasing power of different currencies by eliminating the differences in price levels between countries.
How is the human development index calculated, ie. what are the three indicators used to calculate HDI
1) life expectancy of the country - taken by comparing average life expectancy of the country to the global anticipated life expectancy
2) GNI per capita at PPP- gross national income - the total value of all goods and services produced in a year, plus all net income from abroad
3) Education Index - the mean years spent in schooling and expected years of schooling at birth
Define the HDI
A composite indicator which is a measure of the economic development and welfare of a country, by giving a score from 0 to 1, with 1 being meaning that the country is the most highly developed according to the HDI
What are the limitations of the HDI?
