Economic Growth and Development

Economic Growth and DevelopmentDolor, Kristine AngelicaGentolea, DawnMonsala, Erika JaneTuboran, Kristie Lou

What is economic growth and development?Economic growth:Economic development implies changes in income, savings and investment along with progressive changes in socio-economic structure of country (institutional and technological changes).Development relates to growth of human capital indexes, a decrease in inequality figures, and structural changes that improve the general population's quality of life.

Economic development:

Economic growth refers to an increase in the real output of goods and services in the country.

Growth relates to a gradual increase in one of the components of Gross Domestic Product: consumption, government spending, investment, net exports.

Stages of economic growth and developmentRostows stages of development: It is a model of economic growth suggesting that all countries pass through a series of stages of development as their economies grow. Traditional stageExistence of barterAgricultural base economyExtensive labourSubsistence economy

Precondition Development of mining industriesSociety begins to develop manufacturing country advances to a more complex economy, beginning of economy development levels of technology develop development of a transport system- TRADE.

Take-offIncreased in industrializationFurther growth in savings and investmentDecrease in agricultural workers

7Drive to maturityIndustry more diversifiedIncrease in levels of technology utilizedstandards of living rise Use of technology increases National economy grows and diversifies Increased percentage of Nations wealth- invested into developing its economy

High Mass ConsumptionIndividual incomes are greater than necessary for buying essentials growing demand for additional consumer goods and services Improved health care systems and education Economy flourishesHigh output levelsMass consumption of consumer durablesHigh proportion of employment in service sector

Formula for calculating Economic Growth

Formula use to compute Gross National Product (GNP)GNP is a measure of a country's economic performance, or what its citizens produced (i.e. goods and services) and whether they produced these items within its borders.

The general formula for calculating GNP is:

GNP= Consumption + Government Expenditures +Investments+ Exports + (Foreign Production by U.S Companies Domestic Production by Foreign Companies)

How it works/Example:GNP includesincomeearned by citizens and companies abroad, but does not include income earned by foreigners within the country.The figures used to assess GNP include the manufacturing of tangible goods (cars, furniture and agricultural products) and the provision of services (education, healthcare, and business services). GNP does not include the services used to produce manufactured goods because their value is included in the price of the finished product. However, GNP does includedepreciationand indirect businesstaxeslikesales tax.METHODS USED TO ASSESS ECONOMiC GROWTHThere are 2 ways in assessing Economic Growth:

1. GDPa. Using the Expenditures Approachb. Using the Income Approach

2. GNPa. Nominal GNPb. Real GNPGROSS DOMESTiC PRODUCT

Is one the primary indicators used to gauge the health of a country's economy.

It represents the total value of all goods and services produced over a specific time period.

GDP is expressed as a comparison to the previous quarter or year.Transfer Payments$54Interest Income$150Depreciation$36Wages$67Gross Private Investment (I)$124Business Profits$200Indirect Business Taxes$74Rental Income$75Net Exports (X-M)$18Net Foreign Factor Income$12Government Purchases (G)$156Household Consumption (C)$304Table 1: ExpendituresGDP = C + G + I + (X - M)C = all private consumption, or consumer spending in a countrys economy

G = the sum of government spending

I = sum of all the business spending on the capital in the country

X-M = the total net exports of the country, estimated as total exports less total imports(X-M = Exports Imports) GDP = $304 + $156 + $124 + $18Transfer Payments$54Interest Income$150Depreciation$36Wages$67Gross Private Investment (I)$124Business Profits$200Indirect Business Taxes$74Rental Income$75Net Exports (X-M)$18Net Foreign Factor Income$12Government Purchases (G)$156Household Consumption (C)$304GDP = C + G + I + (X - M)Table 1: ExpendituresGDP = $602Transfer Payments$54Interest Income (i)

$150Depreciation$36Wages (W)$67Gross Private Investment$124Business Profits (PR)$200Indirect Business Taxes$74Rental Income (R)$75Net Exports$18Net Foreign Factor Income$12Government Purchases$156Household Consumption$304Table 1: IncomeNI = W + R + i + PRW = wages

R = Rental income

i= Interest income

PR = are business profitsGDP = NI + Indirect Business Taxes + DepreciationTransfer Payments$54Interest Income (i)

$150Depreciation$36Wages (W)$67Gross Private Investment$124Business Profits (PR)$200Indirect Business Taxes$74Rental Income (R)$75Net Exports$18Net Foreign Factor Income$12Government Purchases$156Household Consumption$304Table 1: IncomeNI = W + R + i + PRNI = $67 + $75 + $150 + $200

NI = $492GDP = $492 + $74 + $36GDP = NI + Indirect Business Taxes + DepreciationGDP = $602GROSS NATiONAL PRODUCT

- GDP + any income earned by residents from investments made overseas.

Also, the income earned within the domestic economy by overseas residents.

It measures whatever goods and services are generated by the citizens and whether these are produced within the borders of the country or not.Nominal Price

It is the cost of the good at the current price level.

Changes in nominal prices result directly from changes in the price level due to inflation.B. Real Price

It is the cost of the good at a base year price level.TOP 10 POOREST COUNTRIES OF THE WORLDGDP (PPP*) per Capita

http://www.mapsofworld.com/world-top-ten/world-top-ten-poorest-countries-map.html TOP TEN POOREST COUNTRIES OF THE WORLD (as of July 18, 2014)COUNTRYGDP (PPP*) per Capita ($)1. DR Congo394.252. Zimbabwe589.463.Burundi648.584. Liberia716.045. Eritrea792.136. Central African Rep.827.937. Niger853.408. Malawi893.849. Madagascar972.074. Afghanistan1,072.19TOP 10 RICHEST COUNTRIES IN THE WORLDGDP [Per Capita ($)]

http://www.mapsofworld.com/world-top-ten/world-top-ten-richest-countries-map.htmlTOP TEN RICHEST COUNTRIES OF THE WORLD (as of Feb 14, 2015)COUNTRYGDP [Per Capita ($)]1. Qatar154,894.182. Luxembourg90,332.893. Singapore78,761.924. Brunei Darussalam73,823.135. Kuwait70,785.466. Norway64,363.147. United Arab Emirates63,180.838. Switzerland53,976.609. United States53,000.9710. Hongkong SAR52,984.06