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ECON 140: Economic Growth and Development Notes

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ECON 140 NOTES
ECONOMIC GROWTH AND DEVELOPMENT
Definition of growth and development
Growth is narrow concept confined only to change in the output/income of an economy
which in turn is the sum of the output changes in the primary (agriculture), secondary
(manufacturing) and tertiary sectors (banking).
Development is wider concept which include rise in the per capita income, growth
promoting factors, structural changes in the economy and improvement in the welfare of
the poor.
Economic growth is the measure the value of output of goods and services within a time
period e.g annually is expressed in the absolute figures a more often in terms of
percentages.
Economic development is a sustained, concerted action of policy makers that promote
the standard of living and economic health. Such actions involve development of human
capital, critical infrastructure, environmental sustainability, social, health, safety, literacy
and other initiatives.
Measure of economic growth
1. Gross Domestic Product (GDP) – is the market value of all official recognized
final goods and services produced within a county in a year, or over a given
period of time.
2. Gross National Product (GNP) –is the total value of all final goods and service
produced within a nation in particular year, plus income earned by its citizens (
including income of those located abroad), minus income of non-residents located
in the country.
3. GDP per capita – GDP/Population
4. GNP per capita – GNP/ Population
Component of economic growth
1. Sustained growth – The growth process can be sustained by growth promoting
factors like improvement of human skills and knowledge, increase in physical
capitals and stocks among other.
2. Structural change– like transformation of agriculture to industries and services
3. Per capita income
Per capita = Total income/Total population
Measures of economic development
1. GNP per capita –the more produces per person, the more “developed” it is
assumed to be. Which country between India and Switzerland is more developed?
The GNP of India is $336 billion and the GNP of Switzerland is $288 billion.
India produces more than does Switzerland, but everybody would agree that
Switzerland is more economically advanced. Why because population of India is
988 million and the population of Switzerland is 7 million. Therefore, GNP per
capita of Switzerland is $40,630 and the GNP per capita of India is $ 340.
....................

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