Economic Growth And Development

Question 1

What is the structure of the economy in terms of primary, secondary and tertiary sectors, give examples?

Answer 1

• Changing balance of output
• Primary=farming
• Secondary=manufacturing
• Tertiary=Banking, Software

Question 2

What is meant by economic growth?

Answer 2

Is an in rease in Real GDP in an economy in a year caused by an increase in AD or an increase in LRAS

Question 3

Economic development?

Answer 3

Improving people’s well-being and quality of life, involving improvement in standards of living, improved healthcare, edication, GNI per capita

Question 4

Sustainable development?

Answer 4

development that meets the needs of the present without compromising the ability of future generations to meet their own needs

Question 5

What are the main macroeconomic policy objectives?

Answer 5

1) Economic growth
2) Low inflation
3) Low unemployment
4) Balance of Payments
5) Fair income distribution

Question 6

What is a recession?

Answer 6

General decline in economic activity, generally occur when there is a widespread drop in spending

Question 7

What is meant by real GDP?

Answer 7

measure that reflects the value of all goods and services produced by an economy

Question 8

What is meant by nominal gross GDP

Answer 8

Evaluated at current market prices

Question 9

Calculate Real GDP per capita?

Answer 9

GDP/Population

Question 10

Causes of economic growth?

Answer 10

• 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

Question 11

What is a Production Possibility Curve, and what does it show?

Answer 11

model used to show the tradeoffs associated with allocating resources between the production of two goods (capital and consumer)

Question 12

What is the difference between short and long run economic growth?

Answer 12

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)

Question 13

Examples of short run economic growth?

Answer 13

-Increase in componets of AD e.g. Increase C

Question 14

Examples if long run economic growth?

Answer 14

• Increase in quantity if FofP
• Increase in quality of FofP
• Increase in productive efficiency

Question 15

How to show short run economic growth on a diagram?

Answer 15

• AD shifting right

- Point within the PPF diagram moved closer to max productive efficiently

Question 16

How to show long run economic growth on a diagram?

Answer 16

• Shift of LRAS to the right

- Shift of PPF curve outwards

Question 17

Specific examples of sustainable development

Answer 17

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

Question 18

The impact of growth on sustainable development?

Answer 18

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

Question 19

The impact of growth on sustainable development?

Answer 19

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

Question 20

Why might economic growth not lead to sustainable development?

Answer 20

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

Question 21

Can we have economic growth without harming the environment- it
epends?

Answer 21

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

Question 22

Economic growth may help sustainable development?

Answer 22

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

Question 23

Economic development is a wider concept than economic growth, which
includes?

Answer 23

Standards of living, quality of life making it more difficult to measure

Question 24

HDI?

Answer 24

Human Development Index. Measuring economic development in three
broad areas - per capita income, health and education

Question 25

Features of HDI?

Answer 25

(Human Development Index)

• A scale from 0 to 1 (complete development)
• Based on 3 equally weighted components

Question 26

Life expectancy factors include?

Answer 26

Food supplies, war, disease and natural disasters

Question 27

Adult literacy

Answer 27

% of those aged 15 and above who are able to read and write a simple
statement on everyday life

Question 28

What is GNI per capita?

Answer 28

Measured Gross National Income in a year, and dividing it by the population

Question 29

Why economie growth should lead to sustainable development?

Answer 29

1) Growth increases income/spending in a country. Higher demand, higher
employment, more money can spend on healthier diets, housing, sanitation
etc
2) More income and spending leads to higher tax revenues, invest into better
schools, hospitals, water supply etc
3) HDI correlated with GDP

Question 30

Why economic growth may not lead to sustainable development?

Answer 30

1) Depletion of natural resources
2) Multinationals exploiting short-term profits but then leaving
3) Government failure E.g. corruption
4) Inequalities, growth benefits the few