Economic growth and_development

Lesson objectivesBy the end of the lesson students should be able to:1 define and calculate economic growth2 explain economic development3 explain the causes of economic growth4 discuss the advantages and disadvantages of economic growth5 explain the growth cycles6 discuss policies to alleviate poverty

Economic growth can be defined and measured in two ways:

As an increase in real GDP (real national output) over time.

As an increase in real GDP per capita. Growth in real per capita incomes is perceived to be a better measure of economic performance.

Economic growth is measured in terms of percentage changes in real GDP/ GDP per capita. Assume that in 1988, real GDP for a country was $450bn and in 1989, this figure rose to $500bn. Then the growth rate as measured by the percentage increase in real output is given as: 

This implies that the economy produced 11.1% more of physical goods and services than in the previous year.

The Quality and Quantity of Natural Resources

Quantity and Quality of Human Resources 

Increase in Physical Capital Technological ProgressAllocation of Resources

Higher consumptionEconomic developmentEmployment creationHigher standard of livingPoverty reductionMore tax revenue for governmentMilitary and political influence

Depletion of natural resourcesNegative externalitiesTechnological unemploymentUrbanisationLong term effects of inflation and deficit

balance of payment

the quality and access to education and training

Promotion of research and development A deliberate policy to stimulate savings Stimulation of private investment Promotion of free trade and competition industrialization policy

Growth in real output that is achieved without depleting natural resources or harming the natural environment

BUSINESS OR ECONOMIC OR GROWTH CYCLE is the recurrent pattern of fairly predictable fluctuations in the growth rate of real GDP over time

Growth(expansion)Economic boom(peak)Economic recession(downturn)Economic recovery (upturn)

A sustained increase in the total output or real GDP of an economy

Economic activity is expanding rapidly. Many firms enjoy increased sales and profits. New firms are formed. Output, income and employment are all increasing.

A period following economic recovery in an economic cycle, characterized by an economy working at full or near-full capacity with a low level of unemployment and aggregate demand, sales and profits at or near their peak, and often accompanied by rising inflation

A general slowdown in the rate of economic growth in an economy following an economic boom. Officially, it is usually associated with prolonged period of negative growth in real GDP

Economic slump/depression is a prolonged recession during which economic activity shrinks and unemployment remains very high. There may be deflation as a result.

A period following an economic recession in an economic cycle during which aggregate demand, output, employment and incomes begin to rise

Explain what is meant by economic growth

Discuss how trade and investment can help economic growth

Discuss whether economic growth is always advantageous

Discuss whether economic growth should be the main aim of government economic policy