Economic growth
Economic growth is a
positive change in the output, or production, of a country or an economy. It is
the increase in the market value of all goods
and services produced by an economy over time and is a long-term expansion of a country’s
productive potential.
Economic growth increases
in real GDP. It measures to a numerical value. Therefore, economic growth can
be calculated as a percentage increase in the Gross Domestic
Product (GDP) of a given economy. This is done
by finding out the previous year’s GDP and finding the ratio between the
current and the previous GDP.
Causes of Economic Growth
Economic growth means an increase in
Real GDP. Economic growth means there is an increase in national output and
national income. Economic growth is caused by two main factors:
- an increase in aggregate
demand (Aggregate hours)
i.
Working-age population growth
ii.
Changes in the employment to
population ratio
iii.
Changes in average hours per worker
- an increase in aggregate
supply (productive capacity of labor)
i.
Physical capital growth
ii.
Human capital growth
iii.
Technological advances
There are three different ways of
measuring GDP
- The income approach
- The output approach
- The expenditure approach
Four Factors of Economic Growth: These
four factors of growth are —
- Human Resources: Labor Supply, Education, Skill, Discipline, Motivation.
- Natural Resources: Land, Minerals, Fuels, Environmental Quality.
- Capital: Factories, Machinery, Roads, Intellectual Property.
- Technological Change and Innovation: Science, Engineering, Management, Entrepreneurship.
Economic development
Economic development ideally refers to the
sustained, concerted actions of communities and policymakers that improve the
standard of living and economic health of a specific locality. Economic
development involves development of human capital, increasing the literacy
ratio, improve important infrastructure, improvement of health and safety and
others areas that aims at increasing the general welfare of the citizens. The
terms economic development and economic growth are used interchangeably but
there is a very big difference between the two. Economic growth can be viewed
as a sub category of economic development. Economic development is a government
policy to increase the economic, social welfare and ensuring a stable political
environment. Economic growth on the other hand is the general increase in the
country products and services output. It examines both macroeconomic and
microeconomic factors relating to the structure of a developing economy and how
that economy can create effective domestic and international growth
Economic development leads to improvements in
many sectors of a nation. There are a variety of indicators that economist use
to measure the level of economic development in a country. The indicators are--
1. Declining
poverty rates,
2. Increasing
literacy rates,
3. Declining
infant morbidity
4. increasing
life expectancy
Difference between Economic Growth and Economic Development
Economic
Development
|
Economic
Growth
|
|
Definition
|
Economic
development refers to a process whereby the people of a country or region to
utilize the resources available to bring about sustained increase in
per-capita production of goods and services.
|
Economic
growth is a long run expansion in an economy’s capacity to produce goods and
services. Implies a sustained rightward shifting of a nation’s production
possibilities curve and aggregate supply curve.
|
Formula
|
Economic
Development = Economic Growth + Structural Change.
|
Economic
Growth = Economic Development – Structural Change.
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Factors
|
Declining poverty rates, Increasing literacy
rates, Declining infant morbidity and increasing life expectancy
|
Economic
growth can occur from two main factors:
1.
The increased use of resources such as land, labor, capital and
entrepreneurial resources due to improvements in technology.
2.
The increased productivity of existing resources use through increased labor
and capital productivity.
|
Measurement
|
Economic development is measured in four ways GNP,
GNP per capita, Welfare, and Social Indicators. Basic needs such as health,
education, food, water supply, sanitation and housing.
|
Economic
growth is measured in real gross domestic product GDP
|
Changed
|
Economic
development is increased upward to the aggregate socioeconomic development of
capitalist institutions and institutions promoted technological development.
|
Economic
growth is a quantitative concept since it involves increased productive
capacity in an economy, which leads to rising national output, incomes and
living standards over time
|
Part
and Parcel
|
Economic
development is impossible without economic growth.
|
Economic
growth is possible without economic development.
|
Economic
Structure
|
It
has changed to economic and social structure.
|
It
has unchanged to economic and social structure.
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Problem
|
Economic
development is problems of underdeveloped or developing countries.
|
Economic
growth is problems of developed countries.
|
Time
|
It
is long term decision
|
It
is short term decision
|
Different
|
Different countries are development different.
|
But
different countries may be growth same.
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