Development Review - Short Answer / Long Essay (Please circle one) Number _10__
2005
Copy the Question here:
Question: explain how and why economists are attempting to find ways of measuring economic growth as ‘distinct’ from
development.
What are the 2-3 key words in the question to pay attention to? You should underline these in a real test situation.
List Verb(s) and Nouns (concepts): economic development and economic growth, measurement
What are the concepts to provide definitions for?
Economic development is the a multiple process involving not only economic goals such as acceleration of economic growth,
the reduction of inequalities and the elimination of poverty but it also incorporates social factors such as changes in popular
attitudes, social structures and national institutions with the ultimate goal of attaining a better quality of life.
Economic growth on the other hand is concerned with the growth of the real GDP of the country at a given time
Structure of your answer
What graph should you draw for
What example can you
this point?
provide to illustrate
your point?
(Use numbered lists or bullet points: develop and explain your argument so that others can understand – no need to write
them out here as this is only for your review. Please insert more rows as necessary).
Remember to EVALUATE for Part B of Long Essays:
E. growth is one aspect of e.development but is not the same
E. growth : A measure of the value of output of goods and
services within a period time
E. development : A measure of the welfare of humans in a
society
GDP/GNP is the indicator for e.growth but it cannot be the
indicator of economic development as a whole because:



Using measure of e.growth can give distorted pictures
of the level of income in a country
A small proportion of the population can own a large
amount of the wealth in a country. The level of human
welfare for the majority could therefore be very
limited.
High economic growth fuelled through capital
spending can hide a number of underlying economic
problems
National Income (problems with using GDP/GNP):
• Reliability of data
– We can’t know how accurate is the data that is
collected?
• Distribution of income
– We can’t know how is the income distributed –
does a small proportion of the population earn
a high percentage of the income or is income
more evenly spread?
• Quality of life
– Can changes in economic growth measure
changes in the quality of life?
– Does additional earnings power bring with it
additional stress, increases in working hours,
increased health and family problems?
• Impact of exchange rate
– Difference in exchange rates can distort the
comparisons – need to express in one currency,
Use Lorenz Curve and Gini
Coefficient
US may have been
growing economically,
but the welfare of the
population is decreasing,
for example, child abuse
which keep increasing
from year 2001-2003
while the GDP value was
keep increasing.
but which one and at what value?

Black or Informal economy
- Some economic activity might not
recorded
- subsistence farming
and barter activity
- building work ‘cash in
hand’, drug dealing, etc.
- charity work,
housework, etc.
- Some economic activity can be carried
out illegally
- Work of the non-paid may not be
considered but may contribute to welfare
PPF
Inquality of distributing income
 all the benefit of growth is gone to the rich
 demand will be determined by income or PPP
- E. growth without development
Redistribution of income
 Growth has gone towards producing goods and
services needed by the poor.
Luxury gds
E.growth with development
necessities
Luxury gds
-
E.growth consist of an
increased output of
necessities




grand houses
swimming pools
luxury cars
restaurant meals




food
clothing
housing, school
transistor radio,
bicycles
Alternative indicators:
Human Development Index (HDI): simple average of three
indexes reflecting a country’s achievements in ..
1. health and longevity (as measured by life
expectancy at birth)
2. education (measured by adult literacy and
combined primary, secondary, and tertiary
enrollments)
3. living standard (measured by GDP per
capita in purchasing power parity terms).
968 million people without
access to improved water
sources (1998)
2.4 billion people without
access to basic sanitation
(1998)
34 million people living with
HIV/AIDS (end of 2000)
854 million illiterate adults,
543 million of them women
(2000)
325 million children out of
school at the primary and
secondary levels, 1834
 It provides a single number for easy
comparison between countries but
include more information than
simple GDP per capita.
Other indicators:
1. Human Poverty Index: measures the proportion of people
not expected to meet specified target levels for giving
economic and quality of life indicators
2. Gender-related development index: HDI adjusted
downward for gender inequality
Summary Conclusion (one sentence)
These two terms are different even though they are the measurements of the status of the country, the economical development
includes more factors, and shows better picture.