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    Lesson 3 Economic Growth

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    Lesson 3 Economic Growth

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    5 views12 pages

    Lesson 3 Economic Growth

    Uploaded by

    maryamaryzapata

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    WHAT YOU KNOW

    Let’s talk about Brazil!


    Economic Growth
    WHAT YOU SHOULD
    LEARN/OBJECTIVES
    1. Define Economic Growth
    2. Explore Economic Growth
    3. Discuss the importance of Economic Growth
    DISCUSSION PROPER
    ECONOMIC GROWTH
     Economists usually measure economic growth in terms of gross domestic
    product (GDP) or related indicators, such as gross national product (GNP or
    gross national income (GNI) which are derived from the GDP calculation.
    GDP is calculated from a country's national accounts which report annual data
    on incomes, expenditure and investment for each sector of the economy. Using
    these data it is possible to estimate the total income earned in the country in
    any given year (GDP or the total income earned by a country's citizens (GNP or
    GNI).
     GNP is derived by adjusting GDP to include repatriated income that was earned
    abroad, and exclude expatriated income that was earned domestically by
    foreigners. In countries where inflows and outflows of this Sort are significant,
    GNP may be a more appropriate indicator of a nation’s income tha GDP.
    ECONOMIC GROWTH
    There are three different ways of measuring GDP
     the income approach
     The output approach
     the expenditure approach
    The income approach, as the name suggests measures people’s
    incomes, the output approach measures the value of the goods
    and services used to generate these incomes, and the expenditure
    approach measures the expenditure on goods and services. In
    theory, each of these approaches should lead to the same result,
    so if the output of the economy increases, incomes and
    expenditures should increase by the same amount.
    Do high levels of GDP necessarily correspond
    with high levels of development?
     Not necessarily
    Countries like China and India have much higher
    levels of GDP than, say, Singapore, New Zealand
    or Belgium, but few would suggest that the latter
    are economically less developed than the former.
    GDP and Purchasing Power Parity
    An additional problem with GDP as a measure of development
    occurs when one compares per capita GDP across countries. This
    problem arises because one US dollar in the United States or
    Europe, for example, does not buy the same amount of goods and
    services as it would do in, say, Africa or Asia. For many goods and
    services one dollar will purchase significantly more in a developing
    country than it will in a developed one. To overcome this difficulty,
    economists often use purchasing power parity (PPP) dollars when
    making cross-country comparisons of GDP. These are dollars that
    are adjusted to account for the differences in purchasing power
    between different countries.
    HUMAN DEVELOPMENT INDEX
    The weaknesses inherent in the use of GDP as a measure of
    development have led to the creation of other measures. The most well
    known of these is the human development index (HDI) published on a
    regular basis by The United Nations Development Programme (UNDP)
    in its Human Development Report. The HDI is a composite index that
    rates countries according to their overall performance in relation to
    three criteria:
    • life expectancy
    • education
    • per capita GDP (using PPP dollars)
    These are related to fundamental freedoms to live and to participate in
    society.
    HUMAN DEVELOPMENT INDEX
    UNDP publishes a number of different human development indicators,
    many of which are composites of other weighted indexes. The main
    indexes are:
     human development index (HDI)
     inequality adjusted human development index (HDI)
     gender inequality index (GII)
     multidimensional poverty index (MPI)
     Gender empowerment measure (GEM)
    ECONOMIC DEVELOPMENT VS ECONOMIC
    GROWTH
    COMPARISON CHART ECONOMIC DEVELOPMENT ECONOMIC GROWTH

    Measurement Qualitative. HDI (Human Quantitative. Increases in real GDP.


    Development Index), gender-related
    index (GDI), Human Poverty Index
    (HPI), infant mortality, literacy rate
    etc.

    Effect Brings qualitative and quantitative Brings quantitative changes in the


    changes in the economy economy
    Relevance Economic development is more Economic growth is more relevant
    relevant to measure progress and metric for progress in developed
    quality of life in developing nations. countries. But it’s widely used in all
    countries because growth is a
    necessary condition for
    development.

    Scope Concerned with structural changes in Growth is concerned with increase in


    the economy the economy’s output
    TO GENERALIZE:

    What is the difference between


    ECONOMIC DEVELOPMENT and
    ECONOMIC GROWTH?

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