LESSON 3: The meaning and measurement of EconDev

• Economic Development

  Economic growth accompanied by changes in output distribution and economic structure
• Economic Development


  The process by which emerging economies become advanced economies. overall health, well-being, and academic level the general population improves
• Economic Development

  All about improving living standards. 'Improved living standards' refers to higher levels of education and literacy, workers' income, health, and lifespans
• Economic Development


  The process in which an economy grows or changes and becomes more advanced
• Development economics


  A field of economics that examines economic development
• Human Capital

  The knowledge, skills, and health that people invest in and accumulate throughout their lives
• Human capital


  The economic value of a worker's experience and skills. Any return on investment can be calculated by "dividing the company's total profit by its overall investments in human capital"
• Some governments are actively involved in improving human capital by offering higher education to people at no cost. This in turn, increases economic growth through additional consumer spending
• Human Capital Value Added (HCVA)


  Calculates the extent to which employees (people) add value to the bottom line (profit)
• Physical capital


  The tangible and human-made goods or assets
• Consumer demand


  The quantity of goods and services that consumers are willing and able to purchase
• Urbanization

  An increase in the number of people living in towns and cities
• Positive effects of urbanization

  • Creation of overall better quality of life
• Negative effects of urbanization

  • Intensive urban growth can lead to greater poverty, with local governments unable to provide services to all people
• Demographic transition


  A long-term shift from high birth rates and high death rates to a society characterized by low birth rates and low death rates
• Economic Growth

  All about expanding GDP
• GDP

  The sum of all economic activity in a nation over a specific period
• Economic development

  The growth of the standard of living of a nation's people from a low-income (poor) economy to a high-income (rich) economy
• Information considered in economic development

  • Average life expectancy
  • Education standards
  • Literacy rates
  • Environmental standards
  • Access to healthcare
  • Income per capita
• Amartya Kumar Sen: 'Economic development is about creating freedom for people and removing obstacles to greater freedom. Greater freedom enables people to choose their own destiny.'
• Human Development Index


  Looks at how long people live, how well people read, how many people go to school, and how much money people make
• Gross Domestic Product (GDP)

  Measures the value of finished goods and services produced within a country. GDP per capita is gross domestic product divided by midyear population
• Three approaches in assessing GDP

  • Expenditure Approach
  • Income Approach
  • Output Approach
• Expenditure Approach

  An output accounting method. The total amount of money spent
• Recession


  GDP growth rate is negative for two consecutive quarters or more
• Consumption (C)


  The value of the consumption of goods and services acquired and consumed by the country's household
• Investment/Capital Spending by business (I)

  Spending on purchases of fixed assets and unsold stock by private business
• Government Spending (G)

  All consumptions, investments, and payments made by the government for current use
• Net Exports (X-M)


  Represents the country's Balance of Trade (BoT) computed as Exports minus Imports
• Income Approach

  States that all economic expenditures should equal the total income generated by the production of all economic goods and services
• Output Approach


  Also called "net product" or "value added" method. It focuses on finding the total output of a nation by directly finding the total value of all goods and services a nation produces
• Gross National Product (GNP)

  Measures the value of goods and services produced by a country's citizens domestically and abroad
• Unemployment


  Labor force that is seeking employment but cannot find it (Age 16 and over)
• Underemployment


  Employed at less than full-time/underpaid/jobs inadequate with respect to training
• Tools used to measure economic development

  • Inflation
  • Unemployment
• Inflation


  The rate of increase in prices over a given period of time
• Unemployment


  A term referring to individuals who are employable and actively seeking a job but are unable to find a job
• Human Development Index (HDI)


  A summary composite index that measures a country's average achievements in three basic aspects of human development: health, knowledge, and income
• Monetary Policy


  A set of actions to control the nation's overall money supply and achieve economic growth. Its strategies include revising interest rates and changing bank reserve requirements. Commonly classified as either expansionary or contractionary
• Fiscal Policy

  The use of government spending and taxation to influence the economy