Introduction to Development

Question 1

Economic Growth

Answer 1

Increase in real output over time, measured as a percentage increase of GDP

GDP = total value of all goods and services produced by a country in a given amount of time

IBO = multidimensional nature

Question 2

Economic Development

Answer 2

improved welfare and quality of life through freedom, reduced poverty, better living standards, education, healthcare, equality, and employment

Question 3

Sources of Economic Growth

Answer 3

• Natural Factors
• Increase in human capital - human (education, etc…)
• Increase in physical capital - infrastructure, banking system, FOP
• Technological factors - development and use of new technologies appropriate to the conditions
• Institutional changes

Question 4

What is capital?

Answer 4

• Things used to make other things
• Gives its owner value or advantage

e.g. factory and its equipment

Question 5

Capital goods

Answer 5

Goods that are used to produce something else

Question 6

Human Capital

Answer 6

People, their skills, their productive capacity (the knowledge, skills, and health that people invest in and accumulate throughout their lives)

Question 7

Physical Capital

Answer 7

factories, machines, vehicles, roads, etc (assets, such as building, machinery, and vehicles, which are owned and employed by an organisation)

Question 8

Financial Capital

Answer 8

Money, credit, (saved-up financial wealth, especially that used in order to start or maintain a business)

Question 9

What is the relationship between Economic Growth and Development?

Answer 9

Some limited economic development is possible WITHOUT economic growth, but over the long term economic growth is usually necessary for economic development.

Note: under certain circumstances economic growth may not lead to economic development.

Question 10

Sources of Economic Development

Answer 10

Using economic growth to improve other areas of society

When does Economic Growth lead to Economic Development?

• Higher incomes
• Improved economic indicators of welfare
• Higher government revenues
• Removal of inequality
• Fewer externalities
• Sustainability

Strategies for development include trade and managing markets, FDI, aid, and managing debt - we will look at each of these in turn

Question 11

Using appropriate diagrams, explain how it is possible to have both economic growth and development and how it is possible to have just economic growth without development.

Answer 11

• LRAS
• AD/AS
• PPC

Question 12

What is sustainability?

Answer 12

Development that meets present needs without compromising future generations

Sustainability:

environmental, socio-political and economic

Question 13

Uneconomic Growth

Answer 13

Production increases at a greater cost to resources and well-being than the value created

Question 14

Relationship between sustainability and poverty (HL)

Answer 14

• Poor people need to rely on natural resources (wood, water) → harm the environment (e.g. cutting down trees) → unsustainable → resources decrease → people are stuck in poverty due to lack of resources
• Poor people can’t own good land → bad land → doesn’t grow much food → can’t make enough from the land to improve their lives

Question 15

LDC

Answer 15

LDC - Least Developed Country

A country that is still in the process of development and:

• In poverty = has not yet reached an arbitrary per capita living standard (GNI is less than US$1085 per year in 2021)
• Suffers from human resource weakness (nutrition, health, literacy)
• Suffers from economic vulnerability (unstable agriculture or exports, economic importance of non-traditional activities, natural disasters, etc)

Question 16

LEDC

Answer 16

LEDC - Lesser Economically Developed Countries

A country with a less developed industrial base and low HDI

Question 17

Low/middle/high income

Answer 17

• Low income countries (LIC) = GNI per capita = US$1,085 or less.
• Lower middle income countries (LMIC) = GNI per capita = US$1,086 - US$4,255.
• Upper middle income countries (UMIC) = GNI per capita = US$4,256 - US$13,205.
• High income countries (HIC) = GNI per capita > US$13,206.