Econ - Developing Economics:

 Mention HDI in any paper 2 question (pg.459)

o The HDI measures average achievement in three dimensions: a long
and healthy life, access to knowledge and a decent standard of living
o Life expectancy at birth
o Mean years of schooling + expected years of schooling
o Standard of living- GNI per capita
o it is far superior to single indicators as a measure of development.
 Evaluation of measuring GNI:
o GNI (or GDP) per capita used alone can be a poor measure of the
different dimensions of development.
o Many countries, even with their given levels of GNI per capita, are
capable of making significant improvements in the well-being of their
populations by making different choices regarding the resources
allocated to health, education and other services or merit goods.
o Economic and human development issues apply not only to developing
countries, but to developed countries as well.
 Evaluation of measuring HDI:
o Economic and human development are much broader concepts with
more dimensions than are reflected in the HDI. 
o The HDI does not provide us with information about income
distribution, malnutrition, demographic trends, unemployment, gender
inequalities, political participation, etc.
 High rate of population growth - in underdeveloped countries, consumption
goes up and savings decrease
 Dual economy - examples in textbook (pg. 444)
 A poverty cycle (poverty trap) arises when low incomes result in low (or
zero) savings, permitting only low (or zero) investments in physical, human
and natural capital, and therefore low productivity of labour and of land. This
gives rise to low, if any, growth in income (sometimes growth may be
negative), and hence low incomes once again. A poverty cycle may occur in a
family, a community, a part of an economy, or in an economy as a whole. An
important feature of the poverty cycle is that poverty is transmitted from
generation to generation. - from textbook
 Underemployment - full potential is not achieved (e.g. doctor working as a
nurse)
 Development  - talk about supply side policies (NEVER demand side)
 Diagrams = LRAS (safer) and PPC
 * MICRO CREDIT (pg.467)
o Investment expenditure = component of AD & GDP (shift  AD curve to
right)
o Overall investment / Investment = supply side policies (subsidies,
R&D), LRAS shifts to the right - developing economics
o Making credit available to very low- income earners can therefore allow
them to make necessary investments in physical, human and natural
capital. 
o Poverty question - talk about investment, poverty cycle,  supply side
policies (interventionist only - in the short term) (NO DEMAND SIDE
POLICIES - fiscal can be talked about- increase in govt expenditure,
increase in public + merit goods)
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