Chapter 2
Growth and Development of Economics
1. What is economic growth?
Economic growth means an increase in the level of real net national product
2. Explain the two features of economic growth.
Two features of economic growth can be obtained by analyzing this definition.
First, for economic growth to take place there must be increase in real national product. This
means
that there must be increase in the volume of production of goods and services. If the volume of
production
remains the same and only the price level increases there will be an increase in national product
in money
terms but that will not be treated as economic growth.
Second, for economic growth net national product should increase. Net national product is
obtained by
deducting depreciation of capital goods from gross national product. Thus, economic growth
takes place
only when net national product in real terms increases keeping the capital stock intact.
3. What are the indicators of economic growth?
There are three alternative indicators
economic growth.
They are:
i increase in real net national product,
ii. increase in per capita real national product and
in improvement in the standard of living of the people.
4. What is economic development?
According to Meier and Baldwin, Economic development is a process through which the per
capita real
national income of a country increases over a long period of time.
, 5. Explain the features of economic development. (Only Two)
If we analyse this definition we can get several features of economic development.
First, economic development is a process which means that it is the interaction of different
forces.
Different economic forces act and interact among themselves. This interaction may be called
the process
of economic development.
Secondly, the net result of the interaction among the forces is an increase in per capita real
national
income. For this to happen the rate of growth of real national income must be greater than the
rate of
growth of population.
Thirdly, for economic development to take place real per capita income should increase. If the
volume of production remains the same and only the price level increases, then per capita
income will
increase in nominal terms. It will not be treated as economic development as there has been no
increase in
per capita real income.
Fourthly, the increase in per capita income must be sustained over a long period of time. If per
capita
income increases in the short run and this increase is not a permanent increase it will not be
termed as
economic development. Even if per capita income increases or decreases in the short run it
must exhibit a
long run trend to increase in order to be reckoned as economic development. If there is no
increasing
trend there will be no economic development.
6. Define underdeveloped economy.
An underdeveloped economy may be described as one where per capita income is low, and
where it is for want of the development of the country's potential. The lower per capita income is
however a sign The real thing is the existence of the potential for development which remains
unutilized or under utilize In the words of Jacob Viner, an underdeveloped country is one which
has good potential or prospects for using more capital, or more labour, or more available natural
resources, or all of these to support its present population on a higher level of living
7. Mention the characteristics of underdeveloped economy. (Only two)
Growth and Development of Economics
1. What is economic growth?
Economic growth means an increase in the level of real net national product
2. Explain the two features of economic growth.
Two features of economic growth can be obtained by analyzing this definition.
First, for economic growth to take place there must be increase in real national product. This
means
that there must be increase in the volume of production of goods and services. If the volume of
production
remains the same and only the price level increases there will be an increase in national product
in money
terms but that will not be treated as economic growth.
Second, for economic growth net national product should increase. Net national product is
obtained by
deducting depreciation of capital goods from gross national product. Thus, economic growth
takes place
only when net national product in real terms increases keeping the capital stock intact.
3. What are the indicators of economic growth?
There are three alternative indicators
economic growth.
They are:
i increase in real net national product,
ii. increase in per capita real national product and
in improvement in the standard of living of the people.
4. What is economic development?
According to Meier and Baldwin, Economic development is a process through which the per
capita real
national income of a country increases over a long period of time.
, 5. Explain the features of economic development. (Only Two)
If we analyse this definition we can get several features of economic development.
First, economic development is a process which means that it is the interaction of different
forces.
Different economic forces act and interact among themselves. This interaction may be called
the process
of economic development.
Secondly, the net result of the interaction among the forces is an increase in per capita real
national
income. For this to happen the rate of growth of real national income must be greater than the
rate of
growth of population.
Thirdly, for economic development to take place real per capita income should increase. If the
volume of production remains the same and only the price level increases, then per capita
income will
increase in nominal terms. It will not be treated as economic development as there has been no
increase in
per capita real income.
Fourthly, the increase in per capita income must be sustained over a long period of time. If per
capita
income increases in the short run and this increase is not a permanent increase it will not be
termed as
economic development. Even if per capita income increases or decreases in the short run it
must exhibit a
long run trend to increase in order to be reckoned as economic development. If there is no
increasing
trend there will be no economic development.
6. Define underdeveloped economy.
An underdeveloped economy may be described as one where per capita income is low, and
where it is for want of the development of the country's potential. The lower per capita income is
however a sign The real thing is the existence of the potential for development which remains
unutilized or under utilize In the words of Jacob Viner, an underdeveloped country is one which
has good potential or prospects for using more capital, or more labour, or more available natural
resources, or all of these to support its present population on a higher level of living
7. Mention the characteristics of underdeveloped economy. (Only two)
