Economic Growth and Development

Question 1

Define ‘standard of living’

Answer 1

the material welfare of an economy, usually considered to be equivalent to real national output per capita

Question 2

Define ‘economic development’

Answer 2

improvements in the standard of living, as well as the social and political welfare, of individuals in an economy

Question 3

Define economic growth

Answer 3

refers to increases in national income / national output

Question 4

Define economic development

Answer 4

• a sustained improvement in the quality of life and living standards of an economy
• shown through measures of literacy, life-expectancy and health care outcomes

Question 5

Give 5 characteristics of less economically developed countries

Answer 5

• low life expectancy
• high mortality rates
• low GDP
• fast population growth
• low levels of education
• poor standard of living
• absent or poor healthcare provision

Question 6

What does HDI stand for?

Answer 6

Human Development Index

Question 7

What are the three dimensions of the HDI?

Answer 7

• education
• life-expectancy
• standard of living

Question 8

How is the education component of HDI determined?

Answer 8

by the average years of schooling

Question 9

How is the standard of living component of HDI determined?

Answer 9

by GNI (Gross National Income) adjusted to PPP per capita

Question 10

On what scale is HDI calculated?

Answer 10

Between 0 and 1

Question 11

What was the world average HDI in 1970?

Answer 11

0.48

Question 12

What was the world average HDI in 2010?

Answer 12

0.68

Question 13

What does a HDI of close to 1 show?

Answer 13

a high level of economic development

Question 14

What does a HDI of close to 0 show?

Answer 14

a low level of economic development

Question 15

Give 2 limitations of using HDI

Answer 15

• does not consider the distribution of income
• does not consider how free people are politically, their human rights, gender equality, etc

Question 16

Give 2 benefits of using HDI

Answer 16

• provides a much broader comparison between countries than GDP does
• allows for comparisons between countries to be made
• could show how successful government policies have been

Question 17

Give a measure of economic development, other than HDI

Answer 17

HPI (Human Poverty Index)

Question 18

What 3 things does HPI (Human Poverty Index) measure?

Answer 18

• life expectancy
• education
• the ability of citizens to meet basic needs

Question 19

What is meant by market-orientated strategies?

Answer 19

measures that make the economy more free, with minimum government intervention

Question 20

What factors determine the size of the national income multiplier?

Answer 20

MPW
MPS
MPT
MPM

Question 21

Define national income multiplier

Answer 21

Ratio of a change in equilibrium real income to the autonomous change that brought it about

Question 22

What is the formula for the multiplier?

Answer 22

1/ marginal propensity to withdraw

Question 23

Define the accelerator

Answer 23

Theory by which the level of investment depends on the rate of change in national income

Question 24

What is the accelerator effect?

Answer 24

the accelerator effect is when an increase in national income results in a proportionately large rise in investment

Question 25

Causes of output gaps

Answer 25

Negative output gaps: factors of production being under utilised. Economic shocks

Positive output gaps: Factors of production employed above capacity