ECONOMIC DEVELOPMENT

LESSON 2
 HOW IS
DEVELOPMENT
ECONOMICS
DISTINCT FROM
OTHER ASPECTS
OF ECONOMICS?
 ECONOMIC ECONOMIC GROWTH ECONOMIC DEVELOPMENT

GROWTH • The value of standard of • Results from economic

VS living improves.
• Measured by GDP and GNP
growth
• GDP and GNP are
ECONOMIC insufficient to adequately
DEVELOPMEN capture the essence of
economic development.
T
 ECONOMIC
GROWTH
VS
ECONOMIC
DEVELOPMEN
T
 HUMAN
NEW APPROACHES TO MEASURING DEVELOPMENT
ECONOMIC DEVELOPMENT INDEX (HDI)
Components:
1. Per-capita
income
2. Life-expectancy
at birth
3. Level of
educational
attainment: adult
literacy &
educational
enrolment rates
 HUMAN
DEVELOPMENT
INDEX (HDI)

• Developed by United Nations Development

Program
HDI = DIMINISHING MARGINALlife USE OF MONEY =
Per Capita Income + Life Expectancy At Birth +
Level Of Educational Attainment
• Varies between zero and one
• Useful in recognizing that some countries may
have lower income levels but achieved a lot in
terms of satisfying human needs
 HEALTHY LIFE
EXPECTANCY
• Used by World Health
Organization
• Summarizes the expected
number of years to be lived
in “full health”.
• The years of ill-health are
weighted according to
severity and subtracted from
the overall life expectancy
rate to give the equivalent
years of healthy life.
 GREEN GNP

• Green System of National

Accounting
• Green GNP is the informal name
given to national income
Of natural measures that are adjusted to
take into account the depletion
of natural resources (both
renewable and non-renewable)
and environment degradation.
• Cost of exploiting a natural
resource and valuing the social
cost of pollution emissions.
 MAKING
COMPARISONS
BETWEEN
COUNTRIES
Two different methods in use
for comparing income
between countries:
1. GDP measure – exchange
rate method
2. Purchasing Power Parity
method
 MAKING
COMPARISONS
BETWEEN
COUNTRIES

EXCHANGE RATE METHOD

• Uses the exchange rate between the local currency and the U.S dollar to convert the
currency into its U.S dollar equivalent.
PPP METHOD
• Develops a cost index for comparable baskets of consumption goods in the local
currency and then compares this with prices in U.S for the same set of commodities.
SUMMARY
SEATWORK 1-1
SEATWORK 1-1