Economic Development and Policy

This set of flashcards encompasses key concepts and terms related to economic growth and development policy.

Economic Growth

A sustained increase in economic prosperity as measured by the total goods and services produced in the economy.

Gross Domestic Product (GDP)

A measure that summarizes the economic activity within a country but is considered a good but imperfect measure of economic health.

Harrod-Domar Model

An economic theory that stresses capital investment as the key to growth, suggesting that this year's growth is proportional to last year's investment share of GDP.

Solow Growth Model

A model that introduces diminishing returns to capital, suggesting that long-run growth is driven by technological progress rather than mere capital accumulation.

Convergence

The theory that poorer economies will tend to grow at faster rates than richer ones, leading them to converge in terms of income and growth.

Inclusive Institutions

Economic institutions that encourage broad participation in the economy and uphold property rights, fostering growth.

Extractive Institutions

Institutions that concentrate power and wealth in the hands of a few, hindering economic growth and development.

Resource Curse

The paradox that countries rich in natural resources tend to have slower economic growth due to dependence on these resources and poor governance.

Diminishing Returns

A principle stating that as more capital is added, the incremental increase in output becomes smaller, eventually leading to no growth without technological advancement.

Trust

A societal norm positively associated with economic growth, indicating that higher levels of trust can lead to better economic outcomes.