Brown EC 151 - Study Guide (7 pages)

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Study Guide



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Study Guide

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Pages:
7
School:
Brown University
Course:
Ec 151 - Economic Development

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Chapter 1 Introduction page 1 of 7 the distinction between economic growth and economic development economic growth takes place when there is a sustained ongoing for at least 1 2 years increase in a country s output as measured by GDP or GNP or in the per capita output GDP or GNP per person the growth of GDP per capita or GNP per capita is a better indicator of growth than GDP or GNP because if the population grows faster than output output GDP or GNP could grow while output per person GDP or GNP per capita falls in this case it is misleading to say growth is occurring economic development occurs when the standard of living of a large majority of the population rises including both income and other dimensions like health and literacy the reason for this distinction between economic growth and economic development is because of the way income is distributed it is possible for a nation s economic output per person to increase growth but a large number of people can have their income decrease at the same time if the increase in output is earned by a small percentage of the population for example if 80 of the population is in traditional agriculture and 20 are in the modern sector then the average income per person can increase due to large gains by the modern sector minority but the income of the 80 of the population in the traditional sector can simultaneously be falling over time thus an increase in GDP per capita is insufficient to say development is occurring development occurs when income increases along with other standards of living reduced mortality rates lower illiteracy increased in education increase in life expectancy for example in a hypothetical nation where the majority of people are nomadic and rely on traditional agriculture if a foreign firm exploits a discovery of oil in this nation and there is no accompanying increase in schooling literacy health etc then growth may occur but not development note that standard of living is a somewhat a vague term



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