Economic Growth & Development Flashcards
Define Economic Growth.
increase in the productive potential that an economy can produce.
What is Economic Development?
a better indicator of improved human happiness, and the ability to continue to improve happiness.
What are the measurements of economic development?
Living standards
Access to resources
Access to opportunities for human development
environmental sustainability and regeneration
Access to decent healthcare
Name some common characteristics of less developed economies.
Low incomes per capita & low levels of absolute savings.
Abundance in natural resources.
Higher dependency on export incomes / low export diversification.
informal sector e.g. subsistence farming
Rapid urbanisation
Lower access to advanced country markets.
Fast growth of population & a younger average age.
What are the 2 main indicators of development?
GDP per capita
Human Development Index (HDI)
What does the GDP per capita represent?
It represents the spending power of citizens on consumer goods & services.
State some of the flaws of GDP per capita in using it to measure solely development.
Shadow economy: GDP data ignores the expansion of the shadow economy.
Regional variations in income and spending
Leisure and working hours: increased GDP might have been achieved at the expense of leisure time and they work more hours.
GDP doesn’t represent changes in life expectancy.
Sustainability & environmental considerations.
Which value is the highest value of HDI?
The closer the value is to 1, the higher the standard of living.
What are the three indices of HDI?
Life expectancy at birth.
Education.
Real GNP (gross national product) per capita.
What is the top and bottom ranked country in the HDI ranking?
Top = Norway Bottom = Niger
What is the main aim of the Millennium Development Goals?
The MDGs commit the international community to an expanded vision of poverty reduction and pro-poor growth, one that vigorously places human development at the centre of social and economic progress in all countries.
What are the barriers to growth and development?
Corruption = e.g. bribery of government officials which prevents normal economic activity taking place.
Institutional factors = e.g. legal & judiciary structures. In poorer countries these institutions are under developed which can prevent efficient economic activity.
Infrastructure gaps = e.g. roads, railways. These are often lacking in poorer under developed countries.
Human capital weaknesses = people’s work and their collective knowledge, skills, abilities and capacity to develop and innovate.
Property rights.
Inequality = e.g. income & gender
Informal employment and a lack of tax revenue = e.g. cash in hand payments.
Domestic savings gap.
Brain drain - skilled workers have an incentive to move to a more prosperous country.
Define interventionist strategies and give some examples.
Policies and measures in which government plays an active role in manipulating markets and allocating resources.
E.g. Infrastructure investment, education & training investment, overseas aid, improving institutions, debt cancellation, state investment in welfare systems, taxes and subsides to deal with externalities.
What are market based strategies and give some examples?
They are strategies that helps open companies up to trade.
E.g. trade liberalisation, privatisation, policies to attract inward investment & greater role for the price mechanism in allocating resources.
Why can a over-reliance on trade carry risk for developing nations?
Susceptible to volatile price changes.
Risk of cyclical downturns in demand.
Structural unemployment in some industries.
Suffer from the resource curse.
