Macro Green Booklet Yr2 Flashcards
What is economic development?
Economic development = an increase in economic welfare. It involves an increase in living standards, freedom (from oppression) and life expectancy.
Development is also concerned with how sustainable the economy is and whether the needs of future generations can be met.
What is economic growth?
Economic growth measures an increase in real GDP over a quarter or a year.
Economic growth is the increase in a country’s real national output. This is caused by increases in the quality or quantity of factors of production, which cause an outward shift in the PPF.
What is the difference between growth and development?
Growth does not equal development.
Economic growth is the increase in a country’s real national output.
Economic development is an increase in economic welfare.
Economic growth does not necessarily improve the economic welfare of all or most of the people living in a country.
Why is economic growth good for development?
•Economic growth will mean HIGHER INCOMES, this will imply more jobs being created and improve the quality of life and they can afford more goods and services. (Material standard of living has improved). Also reduce income inequality and poverty.
•HIGHER PROFITS- more confidence so will higher more people and produce more. They can then use the higher profits to invest in technology, which can be more sustainable and inclusive.
•FISCAL DIVIDEND- higher incomes and profits mean we can assume higher taxes are collected. Creating higher fiscal revenue for the government, if the government is efficient and without corruption. This money can Be spent on areas which help development such as health, education and infrastructure.
Consider how economic growth can take place without improvements to development?
Economic growth is not all encompassing and does not always equal development. This is because:
1. There is no guarantee distribution of income will be distributed equally. Therefore the standard of living has not increased for all, there is no equality in standard of living. Also increasing income inequality which can hinder development.
2. Major negative externalities such as pollution and degradation can reduce peoples well-being. Depleting natural resources also raise concerns about the sustainability of future of development.
3. Growth taking place in one dominant sector has no guarantee it will benefit the economy or society as a whole.
Growth is necessary but NOT sufficient condition of development.
To whot extent does economic growth lead to economic development?
Growth is necessary but NOT sufficient condition of development. Other conditions such as:
•Needs to be strong governments
•Even redistribution of income
•Need to be firms who have the incentive to invest.
Also need to be present.
What are the main characteristics of less developed economies?
- Low living standards
- Low productivity of factors of production
- High population growth in comparison to developed countries
- High levels of unemployment and underemployment (resources which are used for only part of the time)
- A narrowly focused economy, commonly with dependence on agriculture and export of primary products.
- Poor infrastructure
Less developed countries are a diverse range of countries which have many differences as well as some common features. It is important when evaluating in your exam you remember there is not a one size fits all type of m less developed country or one set of policies for all less developed countries.
What are the main indicators of development?
Indicators of development these include GDP per capita, information on the distribution of income, morality rates and health statistics and HDI.
Why may GDP or GNI per capita be a poor indicator of economic development in a country?
•Double counting- including the value of output in the primary sector and then again in the manufacturing sector once it is produced inflating the value.
• informal activity is not included so GDP will be lower than it should be.
• There will be errors. When collecting huge amounts of data for a short period of time.
What is HDI?
An index based on life expectancy, education and per capita income indicators. It ranks the world’s countries into four tiers of development: very high, high, medium and low.
✅Borad measure includes 3 key areas of development.
❌All weightings are equal and so allocating resources may not be efficient as we don’t know exactly where the problem of lack of development lies.
How could improvements in the provision of education and training lead to economic development?
• Education leads to higher productivity levels.
• More education means there will be more educated people and therefore they will have a great potential to gain good jobs and earn higher incomes and get a good standard of living.
• Promotes economic and social choice
• If women are educated can lead to gender equality.
• Health benefits through the awareness of hygiene and diseases
• Can also improve and pursuit advancement of technology
How could investing in health care lead to economic development?
•More healthier people are the more productive they will be
•Healthier they will be happier- standard of living
•Sanitation and drinking water
How could an increase in the level of investment improve economic development?
•Access to markets- more competitive
•FDI
•Accesses to schools and hospitals
What are the barriers to growth and development?
•Corruption
•institutional factors
•poor infrastructure
•Uneducated workforce
•lack of property rights
•primary sector dependency
What is a MNC?
Multi-national corporation - an organisation which operates in more than one country
Benefits of MNCs
• huge FDI
• encourage international trade
• job creation
• infrastructure projects
• increase revenues for host
• economies of scale- lower costs
Trade gains diagram
