Vedant Dwivedi

21322029

SHORT ANSWER QUESTIONS

1) United Nations Development Programme (UNDP)

2) The 3 indicators are :
 real per capita GDP adjusted for different PPP
 Education- literacy
 expectancy

3) India ranks 131 among 189 countries.

4) According to Sen, ‘functionings’ is the use that a person can make out of a given
commodity that they own.

5) The 3 core values are :

 Sustenance
 Self-esteem
 Freedom

6) India is a lower-middle income country (LMC).

LIC LMC UMC
Afghanistan Algeria China
Eritrea Angola Brazil
Myanmar Benin Belarus
Burundi Nepal Turkey
Zimbabwe Djibouti Chile
Burkina Faso Slovakia Colombia
Chad Ukraine Poland

7) PPP stands for Purchasing Power Parity, i.e. the number of units of a currency
needed in a country to buy an identical basket of goods that can be bought from $1
in USA.
Example: A bottle of dishwasher can be bought in India for Rs 180, while in USA
you can purchase it for USD 4.65.

8) the four major strands of thought on economic development post WWII:

 the linear stages of growth model
 structural change patterns and models
 the international-dependence revolution
 the neoclassical counterrevolution (free market)
 9) IN LDCs, the comprador groups are the elites of the country who are directly or
indirectly linked to the foreign organisations and increase the country’s
dependence on wealthy capitalist countries.

10) The public choice theory advocates for zero interference by the government in a
country’s economy, as they are corrupt and act solely in their interest.

LONG ANSWER QUESTTIONS

1) HDI considers 3 elements, namely income, life expectancy and education. The HDI offers identical
weightage to every of those elements. Thus HDI = (income index) + (life expectancy index) +
(education index) 3 Income index: To calculate income index, we use the PPP GDP per capita of the
USA. PPP is taken to standardise for differing living cost in every USA. This is in addition adjusted
for diminishing marginal utility of income with the aid of using taking the log of income. This is
subtracted from the lower goalpost (PPP $100), i.e. the quantity underneath which a rustic’s income
can’t likely be. This fee is taken relative to the most that a rustic can aspire to attain (USD $4000, set
with the aid of using UNDP). Thus Income index = log (PPP GDP per capita) - log(100) log(40000) -
log(100) Life expectancy: The common life expectancy in years of a rustic is subtracted from the
lower goalpost of 25 years. It is taken relative to eighty five years as it's far the aim that a growing
USA must aspire until the subsequent generation. Life expectancy index = (life expectancy) - 25
eighty five-25 Education index: It offers two-thirds weight on literacy and one-1/3 on faculty
enrolment. Education index = 2 (adult literacy index) + (gross enrolment index) 3 Literacy index and
enrolment are taken relative to 100%. Enrolment is taken into consideration for all age groups.
Literacy index = (literacy charge) /100 Gross enrolment index= (enrolment charge) /100 No
diminishing marginal utilityUSA is taken into consideration withinside the case of literacy charge
and life expectancy. HDI creates a number of for every USA starting from zero to 1. The variety
representing the fraction of ultimate development. 2) Sen’s ‘Capability Approach’ states that we
want to remember extra than the availability of commodities to the terrible for measuring poverty.
We additionally want to remember the use the human beings could make of those commodities,
termed as ‘functionings’. These functionings range from being disease-unfastened to having self-
esteem. ‘Capability’ is described with the aid of using Sen as the liberty human beings have in
phrases in their desire of functionings, given their personal functions and their command over
commodities. It emphasizes at the individual’s capability of attaining the life they need to guide or
their ‘well-being’. According to Sen, Income and wealth aren't all that subjects. Using them to
beautify our living situations and freedom to select subjects extra for development. It is an
development over the treasured theories because it offers emphasis on elements aside from real
income or degree of intake of commodities. It eliminates instances of ‘increase with out
development’. The concept explains the emphasis on fitness and education withinside the latest
years. It takes into attention of instances in which one can also additionally have income however
there's little availability of important items like nutritious foods. It analyses the impact of the
subsequent determinants at the functionings: • Personal heterogeneities - variations related to
illnesses, disability, age, and gender; • Environmental diversities like severe cold, heat, rain or
pollution; • Variation in social condition – provisions like education, security, magnificence device; •
Differences in relational perspectives – eg: the garments for capacity to seem in public with out
disgrace differs in a wealthy and terrible community; • Distribution in the family – in a few
households boys can be given extra meals than girls. 3) MDGs or the Millennium Development Goals
become followed with the aid of using 189 member international locations of the UN in September
2000 to gain the subsequent developmental goals with the aid of using 2015: • Eradication of severe
poverty and hunger, with the aid of using halving the share of human beings living with an income
of $1 and halving the share of human beings laid low with hunger; • Achieving well-known primary
education for all boys and girls; • Promoting gender equality and empowering girls with the aid of
using casting off gender disparity in education and different areas; • Reduction of baby mortality
with the aid of using two-thirds; • Improving maternal fitness with the aid of using lowering the
maternal mortality ratio with the aid of using 3/4th; • Combatting HIV/AIDS, malaria, and different
illnesses; • Ensuring environmental sustainability, and halving the share of human beings with out
get admission to to secure ingesting water ; • Developing a global partnership for development:
wealthy international locations want to extended aid, take away alternate barriers, and reduce the
money owed of the poorest international locations, and availability of essential drugs in the growing
international locations. Although the MDGs did assist in furthering development at an extended
charge, the goal wasn’t met with the aid of using 2015. The MDGs helped to store as a minimum 21
million more lives with the aid of using elevated remedy of HIV/Aids/Tuberculosis and enhancing
maternal fitness care and baby care. The global has now met the goal associated with secure
ingesting-water. However any development in education or sanitation has been choppy withinside
the rural and concrete areas, or among wealthy and terrible. In fact, the folks who had been
chronically hungry rose because of the meals fee spike in 2008 and the global monetary crisis. The
well-known get admission to to remedy of continual illnesses are nevertheless out of attain withinside
the growing international locations. 4) The new HDI is an development over the conventional HDI
as: • It makes use of GNI per capita as opposed to GDP per capita. GNI covers income earned
overseas which nevertheless advantages kingdom’s citizens. It doesn’t encompass the products and
offerings produced withinside the kingdom with the aid of using different international locations
which advantages others. • The preceding additives of Education index had been changed with the
aid of using the brand new elements - the common actual educational attainment of the complete
populace and the anticipated attainment of today’s children. The first thing covers the common
variety of training years. The information may be without difficulty in comparison over
international locations. Compared to literacy charge, it's far measured extra regularly and has
higher estimates. Enrolment is changed as being enrolled in faculty doesn’t always mean that a
person has attended faculty and received know-how or maybe finished the grade. • The NHDI makes
use of Geometric mean as opposed to common mean. Average mean assumed that the 3 additives can
also additionally atone for every different while the geometric mean guarantees no substitutability
and that terrible performance in any vicinity without delay impacts the overall index . • The fee of
lower goalpost of income has been up to date to cowl the minimum income discovered in Zimbabwe
2008 of 163 USD (in PPP). • The NHDI makes use of the herbal log (ln)alternatively than not
unusualplace logarithm (log) to mirror diminishing marginal gain of income. This displays a extra
ordinary creation of indexes. 5) Some of the traits not unusualplace to all of the growing economics
are: • Underdeveloped markets - The growing international locations have an imperfect marketplace
which requires interference with the aid of using the government. This may be because of loss of o a
stable currency o banking and insurance device o proper roads for interregional transportation of
items o whole statistics alternate among customers and producers o a strong criminal and
foundational device for marketplace • Higher Population Growth Rates – From 1990 to 2008, the
populace in low income international locations rose at a charge of 2.2% in comparison to a zero.7%
in high-income international locations. Due to this, there's an boom in dependency burden because
the energetic labour magnificence has to assist quite a few children. In addition, the growing
international locations have a more based older populace. • Lower Levels of Living and Productivity
- The low and middle-income growing international locations with 84% of the global’s populace,
acquired only (41%) of the global’s income in 2008. The terrible human beings in growing
international locations are stuck in a poverty trap, a cycle of low cycle which results in low funding
in education and fitness which results in low productivity • Lower Levels of Industrialization and
Manufactured Exports – Developing international locations are depending on agriculture and
mineral export for their income. At a low industrialisation degree, they're depending on imports. •
Unequal International Relations – The growing international locations maintain much less decision-
making strength in businesses like WTO, IMF etc. They stay in debt to richer international locations
in phrases of technology, debt, environmental preservation, etc. The wealthy international locations
impose unfair alternate barriers. • Lower Levels of Human Capital – Developing international
locations lack in fitness, education and skill. There is a loss of instructors, attendance of each
instructors and students. People of Sub-Saharan Africa stay malnourished, inflamed with the aid of
using malaria, tuberculosis, AIDS, and different parasitic infections.
6) In an financial system, the entire saving (S) ought to same the entire funding (I).

S=I - (i)

The general saving (S) is a proportion (s) of the entire income (Y) earned.

S=sY. – (ii)

Total funding is the alternate in capital inventory (K).

I= Δ K – (iii)

Δ K / Δ Y= c, in which c is the capital-output ratio.

ΔK=cΔY - (iv)

I=cΔY - from (iii) and (iv)

S=cΔY - from (i)

sY= c Δ Y - from (ii)

s / c = Δ Y / Y , in which Δ Y / Y is the rate of growth of GDP

Thus, the rate of growth of GDP is decided mutually via way of means of the net national savings
ratio (s) and the national capital-output ratio (c).
For a growth in income, the net savings ratio ought to be extra than the capital-output ratio. A
saving of 15%-20% could result in self-sustaining growth.

7) According to Lewis -region version, an underdeveloped financial system includes systems –

• the agricultural region: traditional, subsistence agrarian region . The version makes the idea of
surplus labour on this region, i.e. MPLA is 0. Another assumption is that the actual salary is
decided via way of means of common manufactured from labour as all people have an same
proportion withinside the output.

• the city region: modern, industrialised region which takes labour from the agricultural region
gradually.

According to the determine below, output withinside the rural region is simplest decided via way
of means of labour at a fixed capital. The labour LA at which MPLA = offers the actual salary from
the APLA curve. This surplus labour is transferred to the city region.

In the city region diagram, the output is given via way of means of variable factor labour, fixed
capital and technology. However, the capital will increase from K1 to K2 to K3. This takes place
because of the income earned this is reinvested. The MPL curve is derived from the TPL curve
above. Since it's miles a superbly aggressive marketplace, The MPL curve is likewise the call for
curve. This offers the actual salary rate, WM. At this salary, the deliver of rural labour is taken into
consideration to be flawlessly elastic.

The version is an instance of self-sustaining growth. It is going on until no extra surplus labour may
be introduced in from the agricultural region. Thereafter, labour may be introduced in simplest at
a better price of misplaced meals manufacturing due to the fact the marginal manufactured from
rural labour is now not 0 because of the declining labour-to-land ratio. This is called the Lewis
turning point.

8) Solow Model is a protracted-run growth version. It follows at the Harrod-Domar idea via way of
means of including a variable - labour, and an exogenous variable - technology to growth
equation. Solow version permits for substitution between labour and capital. That is, if there may
be lots of labour relative to capital, a bit bit of capital will cross a protracted manner and vice
versa. According to Solow, capital-output ratio is endogenous. The version makes use of the
subsequent manufacturing function: Y = K^α (AL)^1-α. ;

in which K : inventory of capital

A : productiveness of labour

L : labour

Y : gross home product

α : elasticity of output with recognize to capital

Thus, it analyses alternate in output w.r.t. alternate in availability of labour, growth in
productiveness because of technological growth and capital accumulation. It well-knownshows
diminishing returns to labour and capital separately and consistent returns to each elements
mutually. Thus, this growth rate is temporary. Only technological growth explains long-term
growth withinside the financial system. Openness withinside the marketplace can result in
technological growth extra rapidly. Therefore, it abides via way of means of the concept of
neoclassical growth idea.