What is economic development?
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What is economic development?
Economic development is the sustainable increase in living standards for a country, typically characterised by increases in life span, education levels, and income.
Define nominal GDP.
Nominal GDP is the actual value of all goods and services produced in an economy in one year, with no adjustment for inflation.
What is real GDP?
Real GDP is the value of all goods and services produced in an economy in one year, adjusted for inflation.
State the formula for real GDP per capita.
Formula.
Real GDP per capita = Real GDP ÷ Population
What are the disadvantages of using GDP per capita as a measure of development?
GDP per capita is an average that may mask significant poverty, and it provides limited information on living standards.
What is the Human Development Index (HDI).
The HDI is a composite indicator ,developed by the UN, that combines measures of health, education, and income. It is used to rank countries' development levels.
True or False?
The three indicators that make up the HDI are life expectancy at birth, education levels, and nominal GDP per capita.
False.
The three indicators that make up the HDI are life expectancy at birth, education levels, and real GDP per capita.
How is the HDI scored and interpreted?
The HDI ranks countries on a scale from 0 to 1, with higher values indicating higher development levels and standards of living.
True or False?
The HDI accounts for income inequality.
False.
The HDI does not take into account inequality in the distribution of income.
What are two limitations of the HDI?
The HDI does not measure:
Environmental damage
Resource depletion
Cultural differences
Happiness
Equal rights
How should the phrase at constant prices be interpreted?
The phrase at constant prices refers to real GDP, which is nominal GDP adjusted for inflation.
True or False?
Countries with a higher HDI always have a higher GDP per capita.
False.
While there is usually a positive relationship, some countries may have a higher GDP per capita but a lower HDI due to factors like income inequality.
State three factors that cause differences in living standards.
Three factors that cause differences in living standards include:
The economic system
Government policies
Level of corruption
The tax system
The level of productivity
The population size
The level of education
Define a mixed economy.
A mixed economy is an economic system that combines elements of a market economy and a planned economy through government intervention and regulation.
How does corruption impact living standards?
Corruption reduces efficiencies and lowers productivity. This significantly undermines the quality of life and standards of living within a country.
What type of tax system promotes equality?
Most countries have a progressive tax system for corporate and personal income tax, which promotes greater equality in living standards.
How do productivity levels affect living standards?
Higher productivity levels are rewarded with higher wages, leading to better standards of living.
How does population size impact living standards?
More densely populated countries or cities face greater challenges, and a larger population can strain government spending per capita.
Define the term inflation.
Inflation is the sustained increase in the general price level of goods and services in an economy.
How does inflation impact living standards?
Inflation tends to impact poorer households more, as price increases represent a larger absolute value of their wages compared to wealthier households.
True or False?
Regional differences do not affect living standards.
False.
Many countries have historically poor areas as well as wealthier ones, leading to significant regional differences in living standards.
How does the level of education affect living standards?
Higher education levels directly influence productivity and wages, leading to better standards of living.
True or False?
Government values and accountability do not matter.
False.
The values of a government influence their economic agenda, tax system, and government spending. Governments are more easily held accountable in countries with low corruption.