4.3. Measures of development Flashcards
(8 cards)
Define potential growth
An increase in the productive potential of an economy
Increasing LRAS
Q2CELL
Define actual growth
An increase in the real GDP of an economy
Increasing AD
AD = C+I+G+(X-M)
Define economic development
The process of improving people’s well-being and quality of life, involving improvement in standard of living, reduction in poverty, improvement in health and education, along with increased freedom and economic choice
What does economic development depend on?
Distribution of income
Sustainability
Sector(s) experiencing growth
Describe the HDI
A composite measure of development that expresses the level of development of a country via a numerical value: higher value = greater development
Three dimensions: living standards (GNI per capita), health (life expectancy), education (years of schooling)
Advantages of using HDI to compare development
Broad based: three components, still takes into account incomes
Health and education elements provide a focus on development outcomes
Allows for progress to be measured and compared over time
Provides attention to those countries with low levels of development, aid and other support can be targeted at countries which have highest needs
Limitations of using HDI to measure development
Doesn’t take into account income distribution (but inequality adjusted HDI overcomes this)
Average measure: disguises disparities and inequalities within countries
Arbitrary weighting: should components be evenly weighted?
Tells nothing of the freedoms or choice available in the country
A huge range of other factors still not considered (crime, poverty, pollution, corruption), too narrow
Only concerned with long-term development outcomes
Alternative measures of development?
Inequality adjusted human development index (IHDI)
Multidimensional poverty index
Gender Inequality Index
Sustainable Economic Development Assessment (SEDA)
