Economic Growth And Development Flashcards
What is economic growth- short run
The actual annual percentage change in real national output
What is economic growth long run
An increase in the long-run productive capacity of an economy
Economic development
Process of improving people’s economic well-being and quality of life includes:
-higher living standards
-improved availability of basic needs
-expansion of opportunity via education and enhanced healthcare
-improved resource allocation and sustainability
Main characteristics of less developed countries:
-high dependence on agriculture and over reliance
-low savings and investment rates
-poor human capital
-unequal distribution of income
-rapidly growing populations
-limited technology capacity
main indicators of development
-GDP
-HDI
what does gdp stand for
(gross domestic product) measures the income of anyone within a country’s boundaries - but very limited approach and quite a poor measure of economic development
what does gdp fail to address
-non market activities: somethings are not bought and sold
-environmental factors
-informal economy: drugs
-sustainability
-make-up of GDP
-quality of life
-extent of income distribution: could reduce overall wellbeing
what does HDI stand for and what is it
human development index- measure progress through the achievement of people rather than simply through income and growth figures
what is HDI composite measure of
-life expectancy
-mean and expected years of schooling
-gross national income per capita at PPP
what is GNI
measures all income of a country’s residents and businesses, regardless of where its produced
factors affecting growth and development
-investment
-education
-training
main sources of finance for developing countries
-domestic sources: tax revenues, savings from private sector
- external sources: overseas development assistance, loans taken out by developing countries gov, private external sources (FDI)
what are remittances
-when migrants send home part of their earnings in the form of either cash or goods to support their families
- 75% of remittances are used to cover essential things
macroeconomic advantages of remittances for LDC’s
-lower Gini coefficient
-higher productivity from better nutrition
-key source of foreign exchange as help to overcome domestic savings gap
-inflow on current account of bop
-increase liquidity in financial markets which may push down the interest rate
advantages of remittance
-more stable form of international financial flow than some other financial flows
-additional disposable income helps to fund education and health care
-less malnutrition
-money goes directly to families: less risk of waste or corruption, more effective than overseas aid
-lower risk of extreme poverty
