Difference economic development and economic growth
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HomeIntroduction to Economics
INTRODUCTION TO ECONOMICS
Economic Growth And Development
By Prateek Agarwal Last updated Apr 11, 2019
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What is the difference between Economic Growth and Development? We will start by defining Economic growth and development. Having economic growth without economic development is possible.
Economic growth in an economy is demonstrated by an outward shift in its Production Possibility Curve (PPC). Another way to define growth is the increase in a country’s total output or Gross Domestic Product (GDP). It is the increase in a country’s production.
A country’s economic development is usually indicated by an increase in citizens’ quality of life. ‘Quality of life’ is often measured using the Human Development Index, which is an economic model that considers intrinsic personal factors not considered in economic growth, such as literacy rates, life expectancy and poverty rates.
Growth Occurs When
There is a discovery of new mineral/metal deposits.
There is an increase in the number of people in the workforce or the quality of the workforce improves. Example: training and education.
There is an increase in capital and machinery.
There is an improvement in technology.
There is a discovery of new mineral/metal deposits.
Development Occurs When
Measures of economic development will look at:
An increase in real income per head – GDP per capita.
The increase in levels of literacy and education standards.
Improvement in the quality and availability of housing.
Improvement in levels of environmental standards.
Increased life expectancy.
Difference between Economic Growth and Economic Development
We can also have a situation where there is growth and development, i.e. increase in luxury goods and education.
Development alleviates people from low standards of living into proper employment with suitable shelter. Economic Growth does not take into account the depletion of natural resources which might lead to pollution, congestion & disease. Development, however, is concerned with sustainability which means meeting the needs of the present without compromising future needs.
A. Economic Growth
Growth is an increase in the country’s output.
Economic Growth PPC
B. Development
Development is an improvement in factors such as health, education, literacy rates and a decline in poverty levels.
Economic Development
Change in Development
The Relationship between Inequality and Economic Growth
Poverty has come down most when inequality has fallen, and there is high economic growth. Initial low levels of inequality are associated with more negative elasticities of poverty reduction concerning growth. Higher initial inequality results in less effect on poverty with an increase in economic growth.
1. Savings rate
The marginal savings rate changes with decreasing or increasing income. The marginal savings rate is the fractional decrease in saving that results from a decrease in income.
2. Credit market constraints
The poor can’t get loans.
3. Political economy
Governments pursue poor policies (redistribution policies) trying to reduce inequality which results in high inflation, high deficit, and lower growth. However, there doesn’t seem to any relationship between inequality and economic growth empirically. But, higher economic growth leads to lower levels of poverty (not the same as inequality)
Growth Effect
The positive growth of people’s income and no change in income leads to a decrease in the poverty level.
Answer:
Explanation:
In an economy, the production and consumption of goods and services are used to fulfill the needs of those living and operating within it.The problem of unemployment gives rise to the problem of poverty. Young people after a long time of unemployment find the wrong way to earn money. To get rid from the unemployment stress, they accept alcohol or drugs. Increase rate in Crimes.(a) Social Policy is one of the major components of the Economic Policy
(b) The Social Policy and the Economic Policy are inter-related
(c) The Economic Policy is the integral part of the Social Policy
(d) Social Policy and Economic Policy are separate and each have no relation with the following it