ECONOMIC DEVELOPMENT AND ECONOMIC GROWTH Introduction Economic Growth

ECONOMIC DEVELOPMENT AND ECONOMIC GROWTH

Introduction Economic Growth Economic growth is an increase in the production of goods and services in an economy or real national income. • Increases in capital goods, labour force, technology, and human capital can all contribute to economic growth. • Economic growth can be expressed in absolute terms, such as increasing from $400 bn to $410 bn, or in percentage terms, such as growing by 2. 25%. Tracking changes in percentage term is, clearly, more useful for comparative purposes. Economic growth is an increase in the production of economic goods and services, compared from one period of time to another. It can be measured in nominal or real (adjusted for inflation) terms.

How It Is Measured • Gross Domestic Product – GDP – is perhaps the most commonly used way of measuring growth. Typically for most countries, GDP can be estimated in three ways: Gross Domestic Product (GDP)=The total amount of final goods and services produced in one year within a country. • Economic growth is the percentage change in GDP of a country year after year.

Factors of Economic Growth • Following are some of the important factors that affect the economic growth of a country: (a)Human Resource (b)Natural Resources (c)Capital Formation (d)Technological Development (e)Social and Political Factors.

Importance of Economic Growth • Economic growth is important because it is a necessary ingredient for both higher incomes and higher living standards. • GDP is a measure of both output and income. Growth of output is necessary for growth of income. • Per capita GDP is the nation’s GDP divided by its population. Growth of per capita GDP means more goods and services person. • In most cases, higher levels of per capita GDP will mean that the typical person has a better diet, Improved health and access to medical services, a longer life expectancy, and greater educational opportunity.

Economic Development • Quantitative and Qualitative changes in the economy, promoting the standard of living and Economic health. • Human Development Index is one of the most accurate method for measuring it, which takes into account the literacy rates & life expectancy. • Modernization and industrialization plays important role for economic development of a nation. • Thus, economic development includes both economic growth and economic welfare.

Factors Affecting Economic Development Following are some of the important factors that affect the economic development of a country: • Inflation distorts business decisions as buying capacity of consumer reduces. • Tax Levels Income tax and sales tax (eg VAT) affect how much consumer have to spend, hence the demand. • Interest Rates can impact the growth of an industry. For ex. High car loan interest rate will discourage vehicle industry. • Governmental Policies provides a friendly environment for businesses to move into and operate within a community.

Indicators of Economic Development • Traditional view: GDP Per Capita • Modern view: Life Expectancy Literacy Rates Measures Of Poverty Demographic Indicators Disease Indicators Self subsistence Self- esteem Freedom.

Difference Between Economic Growth and Economic Development