Macro: Growth Flashcards
(20 cards)
Economic growth
Increase in the value of national output
How do we measure growth?
% change in GDP/real GDP
What is real GDP
GDP adjusted for inflation
What is economic development
Development that seeks to improve the economic well being and quality of life for a community
How can we measure development?
Human Development Index(HDI)-life expectancy, average schooling v expected, health etc
Top 4 ranking HDI countries?
Country: HDI: Norway 0.944 Australia 0.935 Switzerland 0.930 Denmark 0.923
Bottom 4 HDI countries
Niger - 0.348
Central african republic- 0.350
Eritrea-0.391
Chad 0.392
Highest GDP
Usa
China
Japan
Lowest gdp
Syria
Tuvalu
Kiribati
High GDP low HDI
India-130th hdi(0.609)
GDP 7th (2,250 billion)Low GDP high HDI
New zealand (9th) HDI-0.913 GDP-(53rd) 179 billion
HDI adjusted by innequality
Norway 0.893
Netherlands 0.861
Switzerland 0.861
Australia 0.858
Inequality adjusted HDI
Combines a countries average achievements in health,education and income and how they are distributed along a countries population by discounting each dimensions average value According to its inequality .
Advantages of growth
Improvements in living standards
More jobs
Greater business confidence
Opportunity for better environment- countries become richer they can invest in cleaner energy
The accelerator effect on investment on capital- as output rises firms need to invest in more capital to maintain LRAS
Disadvantages of growth
Environmental e.g. Pollution
Barriers to economic growth and development
Poor infrastructure
Corruption
Inadequate human capital
Lack of property rights
Primary product dependency
Volatile earnings from commodities
Underdeveloped financial system
Institutional factors
Policies to promote econ growth and development
Market based
Trade liberalisation
Removal of subsidies
Policies to attract inward investment
Allowing to the price mechanism to work more freely
INTERVENTIONST
infrastructure investment
Education and training
Investment in tourism and other services
Overseas aid
Debt cancellation
State investment in the welfare system and
Role of trade promoting growth and development
Trade
Allowing free trade helps development as countries benefit from specialisation in industries where they have competitive advantage
As long as trade takes place between other countries with minimal barriers, the gains from specialisation can be shared between all
Some economists have argued that in reality governments will protect their industries from low cost competition in less developed economies claiming that these countries have an unfair advantage In terms of low cost
Aids role in growth and development
International Aid can take many forms, it is usually provided by developed countries for less developed countries
Common forms include:
Money- soft loans- loans to less economically developed countries below the market interest rate with favourable payback conditions
Goods and services
Aid can be helpful if it comes with no to little conditions attached to it
How can aid be inappropriate
Money may get channeled into benefiting a small group of people in the LEDC
Conditional aid may largely benefit the developed economy granting the aid, if it has to be spent on goods from the economy giving the aid
The systems for distributing aid may not exist meaning few may benefit from the aid
Goods and services may not be suitable for the needs of the population
Those receiving the money may not have the expertise to spend it wisely
