Difference Between Economic Growth and Economic Development

What is economic growth?

A sustained (ongoing for 1-2 years) increase in a country's output, measured by GDP or GNP, focusing on quantity of production, not necessarily quality of life.

How is economic growth measured?

Through GDP growth rates, industrialization, and trade expansion.

What was the Industrial Revolution?

A historical period (1750s-1800s): marked significant economic growth in Europe and North America.

What was the 'Golden Age of Growth'?

The post-WWII era (1950s-70s) characterized by reconstruction and rapid economic growth.

What is the East Asian Miracle?

A period of rapid industrialization and export-led growth in East Asia from the 1960s to the 1990s.

How has growth been in the 21st century?

There has been divergence - some emerging economies grow rapidly while others are stagnate.

What is trickle-down economics, and what is it based on?

The idea that economic growth benefits all as wealth trickles down from the rich to the poor, and it is based on the assumption that market forces spread growth gains.

What is the influence of trickle-down economics?

It was influential in the 1950s-80s development policy (especially modernization theory, IMF/World Bank structural reforms).

What are some critiques of trickle-down economics, and what are some examples?

Economic growth often leads to rising inequality and benefits the rich more than the poor. Some examples are Latin America (1980-90) that was marked by high growth and persistent inequality. Another example is India (1990-2000) that was marked with high growth, but rural poverty decline uneven.

What is GDP?

Gross Domestic Product, a measure of a country's economic output.

What is GDP per capita, and what is it measured in?

GDP divided by the population, providing a better indicator of individual economic well-being. GDP per capita used to compare average income or standard of living across countries, and it is measured in nominal exchange rate

Is GDP a perfect measure of well-being?

No, it does not account for non-economic factors like quality of healthcare, education, and income distribution.

What does GDP fail to measure?

Leisure time, non-market activities, activity at home, quality of the environment, and equitable income distribution.

What is Purchasing Power Parity (PPP)?

An economic theory that compares the relative value of currencies by equalizing the price of a common basket of goods.

Why is PPP important?

It adjusts GDP to reflect differences in cost of living and price levels across countries.

What is the Big Mac Index, and who created it?

A measure of PPP that uses the price of a Big Mac as a simple basket of goods to compare currency values, and The Economist magazine created it.

How does the Big Mac Index suggest currency valuation?

If the price of a Big Mac is lower in one country than in the U.S., that currency is considered undervalued relative to the dollar.

What are some factors that cause deviations in the Law of One Price?

Transport costs, trade barriers, non-tradable goods, and market imperfections.

What is the significance of the Law of One Price?

It states that identical goods should sell for the same price across countries when expressed in a common currency.

What are some of the reasons for deviations to the Law of One Price?

Transport costs, trade barriers, non-tradable goods, and market imperfections

What does the term 'nominal exchange rate' refer to?

The current market rate at which one currency can be exchanged for another.

What is a flaw of using nominal exchange rates for GDP comparisons?

They can be misleading due to fluctuating prices, trade imbalances, speculation and financial markets, monetary policy, and exchange rate policy.

What does the term 'real GDP per capita' mean?

GDP per capita adjusted for inflation, providing a more accurate measure of economic well-being.

What is the impact of income inequality on GDP?

High GDP can coexist with significant income inequality, affecting overall well-being.

What is the relationship between GDP and life expectancy?

Higher GDP per capita is often associated with longer life expectancy, but the correlation is not absolute.

What does GDP not account for in terms of social factors?

It does not measure social issues like crime, pollution, or women's rights.

What is the rank of India's GDP per capita in 2024?

Approximately $2,700, ranking around 130th.

What is the rank of Singapore's GDP per capita in 2024?

Approximately $90,000, ranking 4th.

How does GDP per capita at PPP compare across countries?

It provides a more accurate comparison of living standards by adjusting for cost of living differences.