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IB Economics - Essay Economic Development

IB Economics - Essay Economic Development

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Published by: mykiri79 on Jan 22, 2011
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MAGDA NGUYENTue, 07.11.2010(a) Using examples, explain the difference between economic growth and economic development. (10)(b) Is economic growth always a desirable policy objective for a government? (15)
The concepts “economic development” and “economic growth” both refer to upward changesin an economy. However, these two concepts are distinguished, mainly, based on their economic implications. That is, economic development concerns with changes with a bigger scale in income, savings and investments, which in fact means the changes in standard of living and well-being of population; while economic growth concerns with changes in totalreal output per capita per person. Clear differences are shown when this is applied to realworld economy.Let us look at one example which significantly shows the economic growth: mining inAustralia. Since 1840s, mining has become Australia’s primary industry and contributor to theAustralian economy. The first Australia’s economic minerals were silver and lead. After that,the discovery of copper at Kapunda in 1861 and gold, which was found near New SouthWales in 1851, has led to great economic boom in Australia, called “gold rush”. The gold rushhas brought many advantages to Australian economy. Most significantly, by the 1850s, 40%of world’s gold was produced in Australia. Besides, Australia has become the world’s largestcoal exporter, with 35% of international trade. The rapid growth of mining industries hasimmediately led to expanded output of minerals, which results in Australia’s economicgrowth. One of the most significant evidences is that two thirds of Australian exports to Chinais energy and minerals. Moreover, more than half of the Australia's iron ore exports are toChina.What are the main indicators for economic growth? It is usually recognized that the GrossDomestic Product (GDP) and the Gross National Product (GNP) are the key indicators for economic growth. GDP comprises the total production of a country including all the foreign productions that took place on its land; while GNP also comprises the total production of acountry but excluding all the foreign productions on its land, and including all the productionsthat took place in other countries but by its people. Generally, the total real output of acountry is concerned. The great increase in the real output of mining industries is clearlyshown ever since the mining resources have been discovered in Australia. One more well-known indicator for economic growth is the Unemployment Rate. When the total outputincreases, the unemployment rate should reduce as more people are hired. When miningindustries started to expand their production, naturally, more people have been hired, resultingin lower unemployment rates, which led to greater economic growth. Economic growth isgenerally a shift of the Production Possibility Curve:
Economic Development is a slightly broader concept than economic growth. EconomicDevelopment refers to the changes in a country on a bigger scale. Economic development isestimated based on the standard living and well-being of the population. The main indicatorsof economic development are economic growth, health care and education.There is one very significant example of economic development: economy of India. Since themid-1980s, India has opened up its markets through the economic liberalization and it hasgradually progressed towards a free market economy. Its economic growth has reached 7.5% by the late 2000s and is highly capable of reaching the government’s target of 10% in 2011.Although there was a quick increase in economic growth of India, and the fast rising of theIndian living standards, there is still more than 70% of Indian population living in great poverty - that is, living on less than $2 per day. On the other hand, since the greatdevelopment in India, on the agriculture aspect, it has become the largest producer of milk ,cashew nuts, coconuts,tea,ginger , turmericand  black pepper . 60% of Indian population is employed for Indian agriculture. India has ranked second in agriculture output, fourteenthin industrial output, and fifteenth in service output. There is an economic development inIndia because all the indicators are moving towards to a higher level. Such as: it is clearlyshown that Indian economic growth is steadily increasing, improved health care is shown by alower rate of malnutrition in children, and higher level of education has been reached by lessilliteracy.
sCapital goods

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