Economic Growth And Development Flashcards
What is the structure of the economy in terms of primary, secondary and tertiary sectors, give examples?
- Changing balance of output
- Primary=farming
- Secondary=manufacturing
- Tertiary=Banking, Software
What is meant by economic growth?
Is an in rease in Real GDP in an economy in a year caused by an increase in AD or an increase in LRAS
Economic development?
Improving people’s well-being and quality of life, involving improvement in standards of living, improved healthcare, edication, GNI per capita
Sustainable development?
development that meets the needs of the present without compromising the ability of future generations to meet their own needs
What are the main macroeconomic policy objectives?
1) Economic growth
2) Low inflation
3) Low unemployment
4) Balance of Payments
5) Fair income distribution
What is a recession?
General decline in economic activity, generally occur when there is a widespread drop in spending
What is meant by real GDP?
measure that reflects the value of all goods and services produced by an economy
What is meant by nominal gross GDP
Evaluated at current market prices
Calculate Real GDP per capita?
GDP/Population
Causes of economic growth?
- AD - Higher real wages(C), Tax cuts (C), Devaluation (X up M down), Government spending (G), Lower interest Rates (I+C)
- AS - Increased investment, High labour productivity, Discover raw materials
What is a Production Possibility Curve, and what does it show?
model used to show the tradeoffs associated with allocating resources between the production of two goods (capital and consumer)
What is the difference between short and long run economic growth?
Short run growth usually growth caused by an increase in AD (using spare capacity to increase Real GDP)
Long run growth usually occurs when there is an increase in LRAS (increase in the productive capacity of the economy)
Examples of short run economic growth?
-Increase in componets of AD e.g. Increase C
Examples if long run economic growth?
- Increase in quantity if FofP
- Increase in quality of FofP
- Increase in productive efficiency
How to show short run economic growth on a diagram?
- AD shifting right
- Point within the PPF diagram moved closer to max productive efficiently
How to show long run economic growth on a diagram?
- Shift of LRAS to the right
- Shift of PPF curve outwards
Specific examples of sustainable development
1) Social progress which recognises the needs of everyone. Needs must not
be met by treating others unfairly
2) Effective protection of the environment, limit global environmental threats, such as climate change
The impact of growth on sustainable development?
One major concern is the impact of economic activity on natural and man-
made resources. Led to development of concepts such as ecological
footprints and Carbon footprints
The impact of growth on sustainable development?
One major concern is the impact of economic activity on natural and man-
made resources. Led to development of concepts such as ecological footprints and Carbon footprints
Why might economic growth not lead to sustainable development?
1) Increased extraction of primary resources e.g. oil. Multinational companies
from the developed world and countries like China are keen to exploit them
2) Move from primary to secondary May seen the levels of migration increase
due to more jobs. Movement from rural to urban may see an increase in the
demand for cars, increasing CO2
Can we have economic growth without harming the environment- it
epends?
1) On the likelihood of government failure - e.g. due to corruption or
inexperience a government may not use the increased growth to good effect
2) Developed countries like UK will give for more priority to sustainable
development (unless they are in a recession) as they can afford to take a
longer term view. This isn’t the case for poorer countries as they might prefer
shorter term economic growth
Economic growth may help sustainable development?
1) Multinational corporations (MNCs) may invest in infrastructure/schools/
hospitals
2) MNCs create employment which may increase the tax revenue of the
governments to tackle poverty, I’ll-health and poor education
Economic development is a wider concept than economic growth, which
includes?
Standards of living, quality of life making it more difficult to measure
HDI?
Human Development Index. Measuring economic development in three
broad areas - per capita income, health and education
