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ECONOMIC GROWTH and

DEVELOPMENT

ECONOMIC GROWTH
- An increase in the capacity of an
economy to produce goods and
services, compared from one period
of time to another. Economic growth
can be measured in nominal terms,
which include inflation, or in real
terms, which are adjusted for
inflation. For comparing one country's
economic growth to another, GDP or
GNP per capita should be used as
these take into account population
differences between countries.

Economic Development
- 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.

STAGES OF ECONOMIC GROWTH AND DEVELOPMENT

http://www.lewishistoricalsociety.com/wiki/tiki-read_article.php?articleId=7
2#

Note: Just focus on the GDP Range. This range is the


basis of classifying the stage of development of different
countries based on their GDP
http://reports.weforum.org/global-competitiveness-re
port-2014-2015/methodology/

The Five Stages of Development:

1. Traditional Society- Refers to a


country that has yet to begin developing,
where a high percentage of people are
involved with agriculture and a high
percentage of the countrys wealth is
invested in activities such as the military
and religion, seen as nonproductive by
Rostow. These are societies which have
pre-scientific understandings of gadgets,
and believe that gods or spirits facilitate
the procurement of goods, rather than
man and his own ingenuity.

2.

Transitional Stage

AKA the preconditions for takeoff. Under the model, the process of
development begins when an elite group initiates innovations economic
activities. Under the influence of these well-educated leaders, the
country starts to invest in new technology and infrastructure, such as
water supplies and transportation systems. These projects will
ultimately stimulate an increase in productivity likely increasing the
GDP. There is a limited production function, and therefore a limited
output. There are limited economic techniques available and these
restrictions create a limit to what can be produced. Increased
specialization generates surpluses for trading. There is an emergence
of a transport infrastructure to support trade. External trade also
occurs concentrating on primary products.

3.

Takeoff

Rapid growth is generated in a limited number of


economic activities, such as textiles or food products.
These few, takeoff industries achieve technical
advances and become productive, whereas other
sectors of the economy remain dominated by
traditional practices. After take-off, a country will
take as long as fifty to one hundred years to reach
maturity. Globally, this stage occurred during the
Industrial Revolution. Industrialization increases, with
workers switching from the agricultural sector to the
manufacturing sector. The level of investment reaches
over 10% of GNP. The growth is self-sustaining as
investment leads to increasing incomes in turn
generating more savings to finance further
investment.

4.

Drive to maturity

-Modern technology, previously


confined to a few takeoff
industries, diffuses to a wide
variety of industries, which then
experience rapid growth
comparable to the takeoff
industries. Workers become more
skilled and specialized. The
economy is diversifying into new
areas the economy is producing a
wide range of goods and services
and there is less reliance on
imports.

5.

High Mass
Consumption

- AKA age of mass consumption. The


economy shifts from production of heavy
industry such as steel and energy, to
consumer goods, such as motor vehicles
and refrigerators. Of particular note is the
fact that Rostow's "Age of High Mass
Consumption" dovetails with (occurring
before) Daniel Bell's hypothesized "PostIndustrial Society." The Bell and Rostovian
models collectively suggest that economic
maturation inevitably brings on job-growth
which can be followed by wage escalation
in the secondary economic sector
(manufacturing), which is then followed by
dramatic growth in the tertiary economic
sector (commerce and services).

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tiki-read_article.php?articleId=72#

List of Countries According to Economic


Growth

http://reports.weforum.org/global-competitiveness-report-20142015/methodology/

Macroeconomics - Gross Domestic


Product (GDP)

Two different approaches are used to calculate


GDP. In theory, the amount spent for goods and
services should be equal to the income paid to
produce the goods and services, and other costs
associated with those goods and services.
Calculating GDP by adding up expenditures is
called the expenditure approach, and computing
GDP by examining income for resources
(sometimes referred to as gross domestic
income, or GDI, is known as the resource
cost/income approach.

Expenditure Approach
The expenditure approach utilizes four main components:

Consumption (C) - These are personal consumption


expenditures. They are typically broken down into the
following categories: durable goods, non-durable
goods, and services.

Investment (I) - This is gross private investment; it is


generally broken down into fixed investment and
changes in business inventories.

Government (G) - This category includes government spending


on items that are "consumed" in the current period, such as
office supplies and gasoline; and also capital goods, such as
highways, missiles, and dams. Note that transfer payments are
not included in GDP, as they are not part of current production.

Net Exports (X - M) - This is calculated by subtracting a nations


imports (M) from exports (X). Imports are goods and services
produced outside the country and consumed within, and
exports are goods and services produced domestically and sold
to foreigners. Note that this number may be negative, which
has occurred in the U.S. for the last several years. Net exports
for the U.S. were minus $606 billion during calendar year 2004
(as per Bureau of Economic Analysis, U.S. Department of
Commerce June 29, 2005 press release).

FORMULA: GDP = C + I + G + (X - M)

Gross National Product


- an economic statistic which
includes Gross Domestic Product, plus
any income earned by the residents
from investments made overseas.
Also, the income earned within the
domestic economy by overseas
residents. As explained by
Investopedia, Gross National Product
(GNP) refers to a quantification of
economic performance of a country.
Also, it measures whatever goods and
services are generated by the citizens
and whether these are produced
within the borders of the country.

The general formula used for Gross National Product


is:

GNP = GDP + Net factor income from abroad

Where,

GDP = Gross Domestic Product

Net factor income from abroad = income earned in foreign


countries by the residents of a country income earned by
non-residents in that country

Methods used to assess economic development

Regional
Gross

Output

Regional Product (GRP) or Value Added

Wages
Employment
Others

which includes Productivity, Capital


Investment, Property Value Appreciation, Tax
Revenue and Public Expenditure Changes.

Top Ten Global Economic Challenge


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