Economic Development

What Economic Development covers

Economic development is examined in Unit A2 2, Managing the Economy in a Global World. It covers what economic development means and how it differs from growth, the difficulties of measuring development, national income statistics and comparisons of living standards, the Human Development Index, growth in less developed countries: benefits, costs and constraints and promoting development: aid, institutions, debt and trade.

The 6 subtopics

Each one has its own page.

• What economic development means and how it differs from growthEconomic development, economic growth and developed economy typically look like.Open →
• The difficulties of measuring developmentEconomic development inherently harder to measure than economic growth, why comparing development across countries using exchange rates is problematic and purchasing power parity conversion improve comparisons of development between countries.Open →
• National income statistics and comparisons of living standardsGross domestic product and national income statistics understate living standards by omitting unpaid work.Open →
• The Human Development IndexHuman Development Index and what is it designed to do, three dimension indices combined into the overall Human Development Index and human Development Index do well as a measure of development.Open →
• Growth in less developed countries: benefits, costs and constraintsBenefits of economic growth for a less developed country, foreign exchange gap and why it constrains development and how dependence on primary commodity exports can hold back development.Open →
• Promoting development: aid, institutions, debt and tradeForeign aid, tied and untied aid and world Bank and what does it do.Open →

What you need to know

Answer each one before you reveal it.

Take Economic Development further

The same content, four other ways.

Commonly confused

Pairs that lose marks when they are blurred together.

• Primary income vs Secondary income

  Primary income: a return for supplying a factor of production, such as interest, profit, dividends or wages earned abroad. Secondary income: a transfer with nothing given in return, such as aid or a remittance.

Questions from this topic

Each one with the model answer underneath.

1. 1

   What is economic development?

   Model answer

   Economic development is a sustained improvement in the material and social wellbeing of a population, involving rising real incomes together with better health, education, security and freedom of choice. It is concerned with the standard of living people actually experience and with the widening of the options available to them, not only with the quantity of output an economy produces.

2. 2

   What is economic growth, and how does it differ from economic development?

   Model answer

   Economic growth is an increase in the real value of the goods and services an economy produces over a period, measured by the change in real gross domestic product. Development is broader: it asks whether the extra output translates into longer, healthier, better-educated and freer lives, and how it is distributed. Growth is a change in a single quantitative measure; development is a change in the quality of life across several dimensions at once.

3. 3

   Explain how an economy can experience strong economic growth without much economic development.

   Model answer

   Growth concentrated in a capital-intensive enclave, such as an oil field or a mine operated by a foreign company, can raise measured output while employing few local people and sending most of the profit abroad. If the additional national income accrues to a narrow elite and is not translated into schools, clinics, clean water or infrastructure, the majority of the population sees no improvement in health, education or living standards. Growth may also come at the cost of pollution, displacement or resource depletion, which reduces wellbeing even as output rises.

4. 4

   Can economic development occur without economic growth?

   Model answer

   Some development can occur without growth, because better allocation of existing income towards primary health care, vaccination, sanitation, female education and basic literacy can raise life expectancy and school enrolment substantially at modest cost. There are documented cases of countries achieving health and education outcomes far above what their income level would predict. However, sustained development is very difficult without growth in the long run, because rising living standards eventually require more resources than redistribution alone can provide, and because the tax base for public services depends on national income.

5. 5

   What does a developed economy typically look like?

   Model answer

   A developed economy typically has high real income per head, high life expectancy and low infant mortality, near-universal literacy and long average schooling, a large service sector with a small share of employment in subsistence agriculture, extensive infrastructure and access to clean water, sanitation and electricity, well-functioning financial and legal institutions, and comparatively low absolute poverty. It also has a high proportion of the workforce in formal, taxed employment, which supports the public revenue that funds these services.

6. 6

   What features are commonly found in a less developed economy?

   Model answer

   Common features include low real income per head, a large share of the labour force in subsistence or low-productivity agriculture, high birth rates and a young population, low average schooling and high adult illiteracy, poor access to clean water, sanitation and reliable electricity, a large informal sector outside the tax system, weak infrastructure and thin financial markets, and dependence on a narrow range of primary exports. Absolute poverty is widespread and there is often high underemployment rather than measured unemployment.

What is inside Levo

Six ways to work the same material.

Economic Development revision questions

What does Economic Development cover in CCEA A-Level Economics?

6 subtopics: what economic development means and how it differs from growth, the difficulties of measuring development, national income statistics and comparisons of living standards, the human development index, growth in less developed countries: benefits, costs and constraints and promoting development: aid, institutions, debt and trade. Each one has its own page with questions and model answers.

How is Economic Development organised?

By the CCEA 4410 specification, subtopic by subtopic, so it matches the order you are taught it in.