Booklet 7a - Economic growth an Development

• What is economic growth?

  Economic growth is the increase in the production of goods and services in an economy over a specific period, typically measured by the percentage increase in real Gross Domestic Product (GDP).
• What are the short-run and long-run aspects of economic growth?

  • Short-run growth occurs through the more efficient use of existing resources or increased demand.
  • Long-run growth involves improvements in productivity, often driven by technological advancements and capital accumulation.
• What is economic development?

  Economic development refers to the process by which a country improves the economic, social, and political well-being of its citizens, focusing on enhancing quality of life and reducing poverty.
• How is economic development measured?

  the Human Development Index (HDI), which includes life expectancy, education level, and income per capita, along with other social indicators.
• What are the components of economic development?

  • improvement in living standards
  • reducing inequality of income
  • political stability
  • sustainability for future generations
• What are two policies that can drive economic growth?

  1. Investment in infrastructure development (e.g. transportation, energy).
  2. Education and skills training programs to enhance workforce capabilities.
• Why can a country experience economic growth without development?

  country may have high GDP due to resource exploitation or specific sectors while lacking improvements in social indicators like health, education, and income distribution, leading to high inequality and poor living standards.
• Give an example of a country with high GDP but low HDI.


  Equatorial Guinea has a high GDP per capita from oil exports but a low HDI due to income inequality, poor healthcare, and limited access to education.
• What role does infrastructure play in economic growth?


  Infrastructure development reduces transportation and transaction costs, boosts productivity, and attracts foreign investment, contributing significantly to overall economic growth.
• balanced growth


  how fairly the economic growth is spread across its country
• sustainable growth


  ensuring that resources arent being overused for needs of today to help provide for future generations
• inclusive growth


  ensuring everyone in population has opportunity for growth
• policy objective


  objective a government sets itself to grow the economy (e.g trade deficit)
• policy indicator


  metric to measure performance of an economy ( claimont count, Labour force survey)
• characteristic of LDCs related to income?


  LDCs typically have low per capita income, often measured as Gross National Income (GNI) per capita, which limits consumer spending and investment.
• How does the economic structure of LDCs differ from developed economies?

  LDCs often have economies that rely heavily on agriculture and primary industries, with limited diversification into manufacturing and services.
• What is a common issue with infrastructure in LDCs?


  LDCs frequently suffer from inadequate infrastructure, including poor transportation systems, limited access to clean water, and insufficient energy supply, hindering economic development.
• What is Purchasing Power Parity (PPP)?


  economic theory that compares different countries' currencies through a "basket of goods" approach, aiming to determine the relative value of currencies and the cost of living.
• Gross National Income (GNI)


  GNI is the total income earned by a country's residents, including wages, profits, rents, and taxes, minus subsidies, within a given period.
• How is GNI different from Gross Domestic Product (GDP)?


  GNI includes all income earned by residents, regardless of location, while GDP measures the value of all goods and services produced within a country’s borders, regardless of who earns the income.
• What is the Human Poverty Index (HPI)?


  measures the level of poverty in a country by assessing multiple deprivations experienced by individuals, including income, education, and health.
• Gender Development Index (GDI)


  measures gender disparities in human development by comparing the HDI values of males and females in areas such as health, education, and income.
• How can a country achieve high GDP but low HDI


  A country may have GDP growth driven by resource extraction (e.g., oil) or specific sectors (e.g., mining) while neglecting investments in health, education, and social services, resulting in low (HDI)
• How does political instability affect growth and development?


  Political instability can lead to corruption and poor governance, allowing for economic growth driven by specific sectors while hindering equitable distribution of resources and investment in social programs.
• Foreign direct investment (FDI) may boost GDP by creating jobs and increasing output, but if profits are repatriated and local communities see little benefit, development indicators may remain low.
• How does political instability act as a barrier?


  Political instability can lead to uncertainty, deter investment, disrupt economic activities, and create an environment where resources are mismanaged or corrupted.
• Key barriers to growth and development

  1. poor infrastructure
  2. poor human capital
  3. lack of innovation
  4. corruption
  5. lack of diversity in employment sectors
  6. unsustainabiliy
• Market Policies for economic development:

  1. decrease barriers to trade
  2. Encourage FDI
  3. decrease subsidies to inefficient industries
  4. privatise gov owned businesses
• Interventionist policies for economic development:

  • invest in human capital
  • improve infrastructure
  • invest in tourism
  • diversify economy
  • aid
  • effective tax structure
• overseas aid


  the financial, technical, or humanitarian assistance provided by governments, international organizations, or NGOs to support the economic development and welfare of developing countries.
• types of overseas aid:

  1. Bilateral Aid: Direct assistance from one country to another
  2. Multilateral Aid: Assistance provided through international organizations (e.g., UN, World Bank).
  3. humanitarian: cover emergency crisis
  4. debt relief- cancelling debts country owes
• What is the purpose of overseas aid?


  alleviate poverty, promote economic development, provide humanitarian relief, and support infrastructure projects in developing countries.
• Overseas aid is funded through government budgets, international loans, donations from individuals and organizations, and contributions from multinational organizations.
• benefits of overseas aid: improved healthcare, education, infrastructure, and economic stability; it can also help respond to emergencies and natural disasters.
• criticisms of overseas aid

  • dependency on aid
  • inefficiency
  • corruption
  • lack of entrepreneurship
• Tied aid


  type of assistance that must be spent on goods or services from the donor country, which can limit the flexibility and effectiveness of aid.
• Non government organisations


  NGOs often implement aid programs, providing services such as healthcare, education, and disaster relief, and they can mobilize resources more rapidly than government
• overseas aid contribute to sustainable development?


  Overseas aid can support projects that promote long-term economic growth, environmental sustainability, and social equity, aligning with the United Nations' Sustainable Development Goals (SDGs).