1. Measuring Economic Growth and Development
IB Section 4.1b

2. Warm-Up: Calculate the real GDP growth rate and doubling time
Country
Nominal GDP
Economic Growth
Inflation rate
Real GDP growth
Adjusted for pop. growth
GDP Doubling Time
USA
13.84 T 9% 3% 6%
Pop=1% 5%
14.4 yrs
Mexico
893 B 8% 4%
Pop.=2%
China
3.25T
16%
Pop.=1%
What do these statistics tell us?
What don’t they tell us?
What is the difference between economic growth and development?

3. Development
Difficult to define because it involves normative or value judgment.
Development should address these essential conditions:
Food
Clothing
Shelter
Healthcare
Job
Freedom from fear and indignity

4. Sources of Econ. Growth in LDC’s:
Increase quantity of physical capital (infrastructure)
Increase quantity of human capital (education)
Increase use of technology appropriate to the conditions of the less developed country
Institutional Changes

5. World Bank Classifications: Based on 2017 GNI, per capita
Low Income Countries: Y<$995
Middle Income Countries:
Lower Middle Income $996 - $3895
Upper Middle Income $ $12,055
High Income Countries: Y>$12,056
Low and Middle Income countries are what we generally refer to as “developing”

6. Relationship between: level of Y and structure of production
Poor Countries: primary sector
Example:
Middle Income Countries: secondary sector
High Income countries: tertiary sector

7. Characteristics of Less Developed Countries (generalizations):
Low GDP per capita growth
High poverty (extreme poverty is Y< $1.90/day)
Relatively large agricultural sectors
High birth rates
Large urban informal sectors (black markets)

8. Poverty Cycle * * Low Standard Of Living Low Standard Of Living
Poor health
Poor Education
Low
Savings
Low
Productivity
Low
Investment

9. Income Distribution- Purchasing Power Parity, PPP
A more realistic measurement of living standard than GDP
Accounts for local buying power of a currency to determine GDP
Calculated by the IMF and used by the World Bank in attempt to mitigate the impact of exchange rates.
A GDP adjusted for PPP is generally higher than just GDP

10. Human Development Index
HID is an attempt by the United Nations to create a more comprehensive way to measure standard of living across different countries.
HDI takes into account:
Life expectancy at birth
Literacy Rate
GNI –Gross National Income

11. HDI Continued HDI does not tell us: 2018 HDI Update from UNDP
  inequalities/distributions across a country
poverty levels
human security
empowerment of peoples
2018 HDI Update from UNDP

12. Multiple Choice - Growth is not the same as development because:
A. Growth always results in higher standards of living but development may not.
B. Development is a qualitative concept, growth is a quantitative concept
C. Growth is never negative whereas development can be negative
D. Development involves economic planning, growth does not.

13. The unemployment caused by the shrinking shipbuilding industry in country X is largely absorbed by the leisure industry. This represents a shift in employment sectors from:
A. terciary to secondary
B. primary to secondary
C.Secondary to tertiary
D.Secondary to primary

14. Should Foreign Aid be used to help development?