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: Agricultural goods A B C D E F Manufactured goods

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

Calculating Economic Growth Economic Growth can be defined as an increase real GDP per capita over time. CountryName 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 100 m 110 m 10%2.5%.5%

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

Economic Growth Without Development Luxury Goods And Services Necessities I II 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 mix.Example: luxury homes, restaurant meals, luxury autos.

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