82.

Growth and Development (1)

1. Missing words
Economic growth can be thought of as an increase in the productive __________________ of an economy. It can
be represented by an __________________ shift in the PPF - an economy is capable of producing ____________
goods and services with the factors of production available. Economic growth can be defined as an increase in the
__________________ GDP of an economy. GDP is defined as the total value of all goods and services produced in
an economy over a given time period. The value of real GDP for an economy can fall as well as rise. When economic
growth is negative for two consecutive quarters, an economy is said to suffer from a _______________________.
Missing word; real, capacity, recession, more, outward
2. Data Response
‘With recession looming and unemployment rising, politicians and economists are trying to find ways of stimulating
economic growth. But is growth a good thing? Does it have harmful consequences? Could we live without it, asks
John Sloman.’ Source: www.bbc.co.uk 2008
2.1 What might be some of the benefits associated with economic growth to an economy? ___________________

______________________________________________________________________________________

______________________________________________________________________________________

2.2 List 3 potential disadvantages of economic growth. _____________________________________________

______________________________________________________________________________________

2.3 How might economic growth differ from economic development? __________________________________

______________________________________________________________________________________
3. Data Analysis

Country Real GDP, $bn (2008) Population, mn (2008) Real GDP per capita, $ (2008)
USA 13,164 301.0
UK 2,377 59.8
Japan 4,368 128.2
China 2,645 1,323.6

3.1 Which country has the biggest economy? Which country has the smallest economy? _____________________

______________________________________________________________________________________

3.2 Calculate values for the final column (real GDP per capita) by dividing real GDP by population for each economy.
How does this influence your answers to 3.1? ____________________________________________________

3.3 Why is it important to account for population size when comparing GDP figures between economies?

______________________________________________________________________________________
4. Actual vs. Potential Growth- Using the AD-AS diagram below, distinguish between actual growth in
GDP and potential growth, and provide appropriate policies to achieve both forms of growth.

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83. Growth and Development (2)
1. Define the following terms.
1.1 Economic growth ______________________________________________________________________

1.2 Real GDP per capita ____________________________________________________________________

1.3 Economic development__________________________________________________________________

1.4 Economic welfare ______________________________________________________________________

2. Data Analysis- Estonia, GDP per capita, $, 2004-2009

Year 2004 2005 2006 2007 2008 2009
GDP per capita, $ 8,425 8,880 9,230 9,760 9,990 10,350
Index Value 100
2.1 Calculate index numbers (1 d.p.) for the data in the table (assume 2006 is the base year). Fill in the Table.

2.2 What has happened to the level of GDP per capita in Estonia over the period? _________________________

2.3 What might this suggest about living standards in the economy? ____________________________________

______________________________________________________________________________________

______________________________________________________________________________________

2.4 Will this necessarily be true for the entire population? Explain your answer. ___________________________

______________________________________________________________________________________

______________________________________________________________________________________

2.5 Based on your previous answer, what might it be useful to consider when assessing living standards in an
economy based on GDP per capita figures?

______________________________________________________________________________________

______________________________________________________________________________________
3. List 3 problems economists might have when trying to calculate the GDP for an economy.

______________________________________________________________________________________

______________________________________________________________________________________
4. Data Response
‘Evidence suggests that even though Peru is growing faster than any other South American economy (9.2% in 2007),
poverty is still rife, and development is not widespread.’ Source: The Economist, Poverty amid progress, May 2008
4.1 Explain your understanding of the term ‘poverty’.

______________________________________________________________________________________

______________________________________________________________________________________

______________________________________________________________________________________

______________________________________________________________________________________
4.2 Given your definition of economic development in question 1, what factors should be included in any measure of
‘economic development’? Give 5 factors you consider to be important.

______________________________________________________________________________________

______________________________________________________________________________________

______________________________________________________________________________________

______________________________________________________________________________________
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 84. Growth and Development (3)
1. Explain the importance of each factor when considering the extent of development in an economy.
1.1 Education ___________________________________________________________________________

1.2 Political freedom ______________________________________________________________________

1.3 The % of population based in urban areas (cities and major towns) __________________________________

______________________________________________________________________________________

1.4 The % of population employed in the primary sector (agriculture, resource extraction) ___________________

______________________________________________________________________________________

1.5 GDP per capita _______________________________________________________________________

2. Research Task 1- The Human Development Index
"The [Human Development] Report reminds us that our generation is the first with the resources and technology to allow
people to lead the life they choose and free the entire human race from want."
Kofi Annan , Former UN Secretary General
The Human Development Index (HDI) was introduced in 1990 as a new way of measuring the extent of
development in an economy, based on a number of indicators. Research answers to the following;

2.1 What are the three indicators used in the HDI? ________________________________________________

______________________________________________________________________________________

2.2 Explain how a single HDI value is calculated for an economy. ______________________________________

______________________________________________________________________________________

2.3 Explain why the use of a ‘disaggregated HDI’ may give a better indication of development within an economy.

______________________________________________________________________________________

2.4 The 1995 HDI Report introduced a new concept - GEM. Briefly describe this measure and its significance.

______________________________________________________________________________________

______________________________________________________________________________________

3. Data Analysis Source: adapted from http://hdr.undp.org/en/media/HDR_2009_EN_Indicators.pdf

Country Norway Australia UK Qatar Cuba Brazil Botswana Niger

HDI Score 0.971 0.970 0.947 0.910 0.863 0.813 0.694 0.340
HDI Rank 1 2 21 33 51 75 125 182
GDP per capita, $ 53,433 34,923 33,300 74,880 6,876 9,617 13,604 627
GDP per cap. rank 6 21 27 3 91 76 60 176
Examine the data above. Do you think that, based on the information provided, GDP per capita figures are a good
indicator of development in an economy? Justify your answer.

______________________________________________________________________________________

______________________________________________________________________________________

______________________________________________________________________________________
4. Research Task 2- Alternative Measures of Development
The Human Development Index is perhaps the most frequently used measure of development. However, a number
of alternative measures exist. Prepare a brief presentation on another measure for development for your class. You
may wish to look at one of the following: Human Poverty Index (HPI), Human Suffering Index (HIS), Happy Planet
Index, Legatum Prosperity Index or the Child Development Index.
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85. Growth and Development (4)
1. Missing words
Economic growth can be defined as an _____________________ in levels of real GDP in an economy. However,
there are a number of factors that might restrict the rate of growth for a given economy. Firstly, long term growth in
the economy may be constrained by a lack of ________________________ capital investment (for example, in
purchasing new machinery). This means that there will be limited growth in the supply side of the economy, and so
rising levels of aggregate demand will probably result in ______________________. Investment may be low in the
economy because of _________________ interest rates, or low levels of savings, which can be used to fund
investment projects. An economy with a high level of ________________ may also find that growth is sluggish, as
this represents a _________________________from the circular flow of income.

Missing words: physical, inflation, increase, leakage, high, imports

2. Data Response
‘The earthquake in Haiti will cost the nation’s economy at least 15 percent of its gross domestic product, said
Pamela Cox, the World Bank’s vice president for Latin America and the Caribbean. Haiti, the poorest country in the
Western Hemisphere, had an economy of $6.9 billion in 2008, according to the Central Intelligence Agency’s Web
site. Service accounts for about 52 percent of the gross domestic product in Haiti, and the rest is made up of
agriculture and industry. President Barack Obama said the U.S. would respond with “every element of our national
capacity,” including $100 million in relief spending.’ Source: adapted from www.bloomberg.com

2.1 Define ‘gross domestic product’. ___________________________________________________________

______________________________________________________________________________________

2.2 Explain how the earthquake in Haiti will have damaged the service, manufacturing and agricultural industries in
the economy.

______________________________________________________________________________________

______________________________________________________________________________________

______________________________________________________________________________________

2.3 Outline the ways in which foreign aid, such as the $100 million promised by the United States of America, can be
used to help tackle some of the economic and development problems resulting from the earthquake.

______________________________________________________________________________________

______________________________________________________________________________________

______________________________________________________________________________________
3. Research Task- Other constraints to economic growth and development
Individual countries are often unique in the challenges they face towards achieving economic growth and, more
broadly, development. However, international organisations such as the IMF and the World Bank have tended to
focus on a small number of key factors that they deem to be significant in hindering both growth and the
development. These factors include corruption, political instability, civil and regional conflict, demographic issues,
disease, primary sector dependency and external debt obligations.
3.1 Explain the meaning of the phrases:
a) ‘Demographic issues’ ____________________________________________________________________

______________________________________________________________________________________

b) ‘External debt obligations’ ________________________________________________________________

______________________________________________________________________________________
3.2 Select one of the factors above, or propose an alternative constraint, and produce a report on how that factor
can hinder the growth and development efforts of an economy. Your report should also focus on how such a
constraint can be overcome, and provide example countries which face said constraints.
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