Warm-up How is economic growth and development like a baby’s growth and development?

Economic Growth and Development A Comparison/Contrast IB Economics Section 4.1

Growth Economic: Baby:

Development Economic: * Baby:

Therefore . . . Development is much broader concept than growth Decrease widespread poverty Raise living standards Reduce income inequality Increase employment opportunity Growth enables development

GROWTH: Two ways for GDP to grow, actual and potential. Actual Growth Point A: Points B & E: Points D & C: Point A to Point C: Point F: B F C Manufactured goods D A E Agricultural goods

2nd Way to measure growth Potential Growth Point F Curve I Curve II Potential Growth F Manufactured goods I II Agricultural goods

Calculating Economic Growth Economic Growth can be defined as an increase real GDP per capita over time. Country Name Yr 1 GDP nominal Year 2 GDP nominal Economic growth Real Growth (assuming 7.5% inflation) Increase in Real per capita output (assuming 2% pop growth) Fictoria 100m 110m 10% 2.5% .5%

RULE OF 72 . . . Doubling Time Magic . . . Rule: 1% will double every 72 years If any variable grows at 1% per year it will double in size in approximately 72 years. Example: 2% growth will double in 36 years Formula: 72 divided by growth rate = Doubling time

Economic Growth With Development Here, growth has gone toward producing goods and services used by the poor. Eg; food clothing, elementary schools, radios, bikes Luxury goods And services II I Necessities

Economic Growth Without Development Benefits of growth all go to rich. Unequal income distribution creates this situation. Demand is determined by income, there- fore their purchases will determine a large portion of the production Example: luxury homes, restaurant meals, luxury autos. Luxury Goods And Services II I Necessities

Qatar Watch film for evidence of economic growth and economic development 60 Minutes clip