Economic growth is an increase in the capacity of an economy to produce goods and services, compared

from one period of time to another. It can be measured in nominal or real terms, the latter of which is
adjusted for inflation. Traditionally, aggregate economic growth is measured in terms of gross national
product (GNP) or gross domestic product (GDP), although alternative metrics are sometimes used.In
simplest terms, economic growth refers to an increase in aggregate productivity.

Often, but not necessarily, aggregate gains in productivity correlate with increased average marginal
productivity. This means the average laborer in a given economy becomes, on average, more productive.
It is also possible to achieve aggregate economic growth without an increased average marginal
productivity through extra immigration or higher birth rates.

Economic growth has a ripple effect. By expanding the economy, businesses start to see a surge in
profits, which means stock prices also see growth. Companies can then raise more money in order to
invest more, therefore adding more jobs to the labor force. That leads to an increase in incomes,
inspiring consumers to open up their wallets and buy more.

Economic development is the development of economic wealth of countries, regions or communities for
the well-being of their inhabitants. From a policy perspective, economic development can be defined as
efforts that seek to improve the economic well-being and quality of life for a community by creating
and/or retaining jobs and supporting or growing incomes and the tax base.Progress in an economy, or
the qualitative measure of this. Economic development usually refers to the adoption of new
technologies, transition from agriculture-based to industry-based economy, and general improvement in
living standards.

There are significant differences between economic growth and economic development. The term
"economic growth" refers to the increase (or growth) of a specific measure such as real national income,
gross domestic product, or per capita income. National income or product is commonly expressed in
terms of a measure of the aggregate value-added output of the domestic economy called gross domestic
product (GDP). When the GDP of a nation rises economists refer to it as economic growth.

The term "economic development," on the other hand, implies much more. It typically refers to
improvements in a variety of indicators such as literacy rates, life expectancy, and poverty rates. GDP is a
specific measure of economic welfare that does not take into account important aspects such as leisure
time, environmental quality, freedom, or social justice. Economic growth of any specific measure is not a
sufficient definition of economic development.

“The most necessary condition for the growth of an economy is that the demand created due to newly
generated income should be sufficient enough, so that the output produced by the new investment
(increase in capital) should be fully absorbed”-Harrod-Domar theory.

The evolution of economic growth theories can be drawn back from Adam Smith’s book, Wealth of
Nation. In his book, he emphasized a view that the growth of an economy depends on division of labor.

The theory developed by these economists is known as classical theory of economic growth.
Further, in late 19th and 20th centuries, Karl Marx presented a theory called theory of historical growth
and Schumpeter developed a growth theory of technological innovations. Finally, in late 1930s, R. F.
Harrod and E. Domar presented more relevant theory of economic growth popularly known as Harrod-
Domar theory. Later, neo-classical theory of economic growth was also introduced. Harrod-Domar
theory and neo-classical theory explain modern growth behavior more clearly by analyzing different
economic aspects.

There is obviously a two-way connection between growth and development. Growth clearly encourages
and facilitates development, if only because the costs of transition and possible dislocation are less
burdensome when aggregate income is rising anyway. Conversely, development in certain directions may
be a necessary foundation for durable, stable growth. In any case, the institutions and attitudes that
arise in the course of development certainly affect the growth path of the economy. An important
question is:what are those favored directions?

That is where complication and what I called politicization come into the picture. One disciplined way to
elucidate the connections between development and growth is to start with a simple, clearly stated
model of growth, and look for the ports of entry through which the facts of development can influence
the growth path generated by the model. The standard model of economic growth surely has its
limitations, the most obvious one being its high degree of aggregation. There must be aspects of
economic growth that can not be adequately captured in a model with one, two or three sectors.
Growth theory is limited to those that can.

More specifically, the standard model is essentially an elaboration of the aggregative balance equation
that says: output (as limited by technology and available inputs of labor services, capital services, and
perhaps naturalresources) must provide for (private and public) consumption, (private and public) net
investment, and depreciation.

Poverty means the inability to afford basic necessities. Poverty has many faces, changing from place to
place and across time, and has been described in many ways. Most often, poverty is a situation people
want to escape. So poverty is a call to action for the poor and the wealthy alike a call to change the world
so that many more may have enough to eat, adequate shelter, access to education and health,
protection from violence, and a voice in what happens in their communities.

In addition to a lack of money, poverty is about not being able to participate in recreational activities; not
being able to send children on a day trip with their schoolmates or to a birthday party; not being able to
pay for medications for an illness. These are all costs of being poor. Those people who are barely able to
pay for food and shelter simply can’t consider these other expenses. When people are excluded within a
society, when they are not well educated and when they have a higher incidence of illness, there are
negative consequences for society. We all pay the price for poverty. The increased cost on the health
system, the justice system and other systems that provide supports to those living in poverty has an
impact on our economy.

Living conditions for people who cannot afford to commute are vile and inhumane, as exposures of
inner-city slums show. Red ant evictions aggravate the conditions of people, and there appears to be no
clear leadership to arrest and address these conditions in a progressive medium to long-term rationale
plan with immediate steps that can be taken to ameliorate conditions. For people living in eviscerated
informal settlements and rural areas, conditions are often even worse.

Economic inequality covers a wide variety of topics. It can refer to either income distribution, measuring
the amount of money people are paid, or the distribution of wealth, which captures the amount of
wealth people own. Inequality among nations is covered in the article International inequality, and
inequality within various countries is covered in the article List of countries by income equality. Besides
measurements between countries or states, there are important types of economic inequality between
groups of people.

Important types of economic measurements focus on wealth, income, and consumption. There are
various numerical indices for measuring economic inequality. A widely used index is the Gini coefficient,
but there are also many other methods. Important concepts of equality include equity, equality of
outcome, and equality of opportunity.

Economic inequality is the unequal distribution of income and opportunity between different groups in
society. It is a concern in almost all countries around the world and often people are trapped in poverty
with little chance to climb up the social ladder. But, being born into poverty does not automatically mean
you stay poor. Education, at all levels, enhancing skills, and training policies can be used alongside social
assistance programs to help people out of poverty and to reduce inequality.

Inequality, especially along racial and gender lines, is always reported on in the poverty trends
report.Social inequality is the existence of unequal opportunities and rewards for different social
positions or statuses within a group or society. Two approaches exist to explain why poverty exists. One
explanation is to blame the poor; the other is to blame society.

There are five systems/types of social inequality which include wealth inequality, treatment and
responsibility inequality, political inequality, life inequality, and membership inequality. ... The major
examples of social inequality include income gap, gender inequality, health care, and social class.

Income inequality has been growing around the globe in recent decades

If we continue to ignore the implications, we are in serious trouble. If we continue to ignore the anger
and frustration on the faces of people protesting against their living conditions, we have lost our
humanity.

Reflection Paper

on
Economic Development

Submitted by:

Monica Charlotte Calla

BSA 1-C