CHAPTER 2

1. Briefly explain and/or describe the major economic and social indicators of development.

There are three basic indicators of development in an economy. These are the real
income per capita adjusted for purchasing power, health as measured by life expectancy,
undernourishment and child mortality, and educational attainments as measured by literacy
and schooling.
The most common measure of the overall level of economic activity of a nation is their
Gross National Income (GNI) per capita. We should take note that the Gross National
Income differ from the Gross National Income per capita. The Gross National Income
pertains to the total income earned by a country's residents, including income generated
domestically and income received from abroad. On the other hand, the Gross National
Income per capita refers to the average income earned by the residents of a country. The
interconnectedness between GNI per capita and Purchasing Power Parity (PPP) lies in the
fact that PPP is often used to convert GNI per capita figures into a common currency that
reflects the purchasing power of other different currencies. For example, two countries may
have similar GNI per capita figures in their respective local currencies. However, if the price
levels in one country are significantly higher than the other, the actual purchasing power of
the income may differ.
Other than the average incomes, the development of a country can also be seen it their
average health and educational attainments. The average health of a nation can be
measured on their average life expectancy, undernourishment, child mortality, and also the
fertility rate. Life expectancy refers to the average number of years a person is expected to
live, based on statistical calculations and demographic data. Undernourishment is a
condition in which individuals do not consume enough food to meet their dietary energy
requirements for an active and healthy life. Child mortality refers to the death of children
under the age of five, reflecting the country’s availability and quality of healthcare services,
nutrition, sanitation, and socio-economic conditions. Lastly, high fertility is also reported as
another basic indicator since it can be both a cause and a consequence of
underdevelopment. In addition, educational attainment is also considered as an important
indicator of economic development. Education is a fundamental driver of economic growth,
innovation, social mobility, and improved quality of life for individuals and societies as a
whole. Countries that prioritize education and invest in human capital development tend to
experience higher levels of economic development and prosperity.

2. Why do you think the economic indicators do not provide exact explanations of
development?

An economic indicator is a piece of economic data or statistical data points that provide
insights into the performance of an economy. These indicators are used to analyze
economic trends, forecast future performance, and guide policy decisions. However, it does
not provide an exact explanation of development as such indicators does not always
 correctly predict the future economic situation and development of a nation due to the
uncertainties and complexity of the world.

3. Explain the ways in which developing countries differ in their economic, social, and political
structures.

There is an enormous disparity between developed and developing countries. While

established countries benefit from their highly industrialized and increasing economies,
developing countries are currently attempting to become developed states. Such countries
aim to strengthen their economies and society by implementing sound policies and
maintaining social and economic stability. Although these countries are in the early stages of
industrial growth, they still rely on developed countries to help them establish industries
throughout the country. Most developing countries have a low HDI, similar to the country's
low GDP growth rate, which indicates a significant chance of recession. There is also a lack
of education, transportation, communication, and medical care services.
Labor participation rates vary dramatically in uncontrolled labor markets with low or no
minimum wage. The death and birth rates are also increasing, with high levels of mortality,
particularly among infants, due to both mother and infant malnutrition, and the population is
falling. Unsustainable government debt and unbalanced wealth distribution are also
unavoidable.

4. What are some additional strengths and weaknesses of the Human Development Index as a
measure of development?

The Human Development Index (HDI) is a national socioeconomic development

indicator that combines measurements of education, health, and adjusted real income per
capita.

Strengths:
 The HDI is calculated using reliable data that is updated annually.
 HDI considers multiple factors for measuring development. It includes measures
such as a country's education level, health status, and adjusted real income per
capita.
 The result enables a nation's government to design policies that prioritize economic
and human development needs.
 Assist the government in allocating finances effectively and seeking international
financial assistance if needed.
 HDI indicators are well recognized and can be used to compare data availability
across states and regions.

Weaknesses:
 Some metrics in health and education may appear arbitrary, as there are alternative
ways to assess similar attributes.
 It does not accurately measure the unequal distribution within the country.
  Measuring development should include other dimensions beyond the HDI.
 GNI still has too much weight in the HDI that allows richer countries to artificially
manipulate their rankings. Additionally, GNI does not take into consideration the
hidden economy which tends to make up a larger proportion of less developed
countries' economies.

5. State five characteristics of the developing world.

- Lower Levels of Human Capital
Vast developing world has lagged in its average levels of nutrition, health, and
education compared with developed countries,

- Higher Levels of Inequality and Absolute Poverty

There are enormous gap in per capita incomes between rich and poor nations.
Extremely high levels of inequality are found in many middle-income countries
Inequality is particularly high in many resource-rich developing countries but it is also
diverse in such countries.
Economists use the concept of absolute poverty to represent a specific minimum
level of income needed to satisfy the basic physical needs to survive A problem,
however, arises when one recognizes that these minimum subsistence levels will
vary from country to country and region to region, reflecting different physiological as
well as social and economic requirements.

- Greater Social Fractionalization

Low-income countries often have fractionalization or the division on ethnic, linguistic,
and social forms. This is sometimes associated with civil strife and even violent
conflict, which can lead developing societies to divert considerable energies to
working for political accommodations if not national consolidation. The greater the
ethnic, linguistic, and religious diversity of a country, the more likely it is that there
will be internal strife and political instability.

- Adverse Geography
Many analysts argue that geography must play some role in problems of agriculture,
public health, and comparative development more generally. It was observed that
most developing countries are primarily tropical or subtropical, and this has meant
that they suffer more from tropical pests and parasites, endemic diseases such as
malaria, water resource constraints, and extremes of heat.
.
- Underdeveloped Markets
A few characteristics of underdeveloped markets are that they frequently lack: (1) a
reliable legal system that upholds property rights and enforces contracts; (2) a stable
and trustworthy currency; (3) a road and utility infrastructure that lowers
transportation and communication costs and facilitates interregional trade; (4) a well-
developed and efficiently regulated banking and insurance system; (5) a wealth of
market data that informs producers and consumers about the costs, quantities, and
quality of resources and products as well as the creditworthiness of potential
borrowers; and (6) social norms that promote profitable, long-term business
partnerships..