3.6.1

Factors Influencing Growth & Development

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Economic Growth vs Economic Development

There are a number of key differences between economic growth and development.

Economic growth

Economic growth

Economic growth is measured by an increase in real GDP.
While this allows for higher real incomes, which means people can afford a higher standard of living, it is very important for economists to realise that an increase in real GDP does not equate to economic development, although it may contribute.
Supporting research & development is viewed as a huge supporter of economic growth. South Korea has grown rapidly since 1992 and its R&D has been up to 3.5% of GDP.

Economic development

Economic development

The United Nations (UN) defines development as "the expansion of people’s freedom to live long, healthy and creative lives; to advance other goals they have reason to value; and to engage actively in shaping development equitably and sustainably on a shared planet.”

Common Characteristics of Less-Developed Economies

Less-developed economies often have certain characteristics which stop them from developing faster:

Low investment and savings

Low investment and savings

Increasing the quality or quantity of physical capital can increase the productivity of an economy.
A country or business needs to save money to invest the savings in capital. If a country does not save, then investment in physical capital will be lower.

Command economy and corruption

Command economy and corruption

In some low-income countries, which are less economically developed, there are:
- Command economies, where the price mechanism (or invisible hand) does not allocate resources.
- Corruption and infighting, where resources and investment are not directed to the place where it is intended.
For example, the Democratic Republic of Congo is resource-rich, but politics seems to have slowed economic development.

Lack of education

Lack of education

Education is sometimes called the accumulation of human capital.
High levels of education can make the labour force more productive and increase the output of an economy.

Loans and borrowing

Loans and borrowing

If households or businesses cannot borrow money (get access to capital), then they won't be able to invest in houses, capital (like machinery) or inventory. This will harm economic growth and development.

1

Microeconomics

1.1

Competitive Markets: Demand & Suply

1.1.1Markets & Demand 1.1.2Diminishing Marginal Returns 1.1.3Supply 1.1.4Market Equilibrium 1.1.5Price Mechanism 1.1.6Consumer & Producer Surplus 1.1.7IB Multiple Choice - Demand 1.1.8IB Multiple Choice - Supply

1.2

Elasticity

1.2.1Elasticities of Demand 1.2.2Factors Affecting Price Elasticity of Demand 1.2.3Elasticity of Supply 1.2.4Price Elasticity of Supply 1.2.5IB Multiple Choice - Price Elasticity of Demand 1.2.6IB Multiple Choice - Price Elasticity of Supply 1.2.7IB Multiple Choice - Other Elasticities

1.3

Government Intervention

1.3.1Indirect Taxes & Subsidies 1.3.2Application Question - Taxing Prices or Quantities 1.3.3Subsidies & Price Controls 1.3.4Deadweight Loss & Government Intervention 1.3.5Elasticity & Tax Incidence 1.3.6IB Multiple Choice - Government Intervention

1.4

Market Failure

1.4.1Types of Market Failure 1.4.2Introduction to Externalities 1.4.3Negative Externalities 1.4.4Policy for Negative Externalities 1.4.5Positive Externalities 1.4.6The Deadweight Welfare Loss of Externalities 1.4.7Case Study - The Externalities of Education 1.4.8Public Goods & the Free-Rider Problem 1.4.9Asymmetric Information 1.4.10End of Topic Test - Market Failure 1.4.11Application Questions - Market Failure

1.5

HL: Theory of the Firm & Market Structures

1.5.1Theory of the Firm & Market Structures

2

Macroeconomics

2.1

The Level of Overall Economic Activity

2.1.1The Circular Flow of Income 2.1.2Defining GDP 2.1.3Limitations of GDP 2.1.4IB Multiple Choice - Economic Indicators 2.1.5Business Cycles 2.1.6Output Gaps

2.2

Aggregate Demand & Aggregate Supply

2.2.1The Aggregate Demand Curve 2.2.2Components of Aggregate Demand 2.2.3Shape of the Aggregate Demand Curve 2.2.4Shifts in Aggregate Demand 2.2.5IB Multiple Choice - Aggregate Demand 2.2.6Short & Long-Run Aggregate Supply 2.2.7Alternative Models of LRAS 2.2.8Equilibrium in the AD-AS Model 2.2.9Output Gaps & the AD-AS Model

2.3

Macroeconomic Objectives

2.3.1Introduction to Unemployment 2.3.2Limitations of Unemployment 2.3.3Types of Unemployment 2.3.4Causes & Impact of Unemployment 2.3.5Defining Inflation 2.3.6Measuring Inflation 2.3.7Use of Index Numbers 2.3.8The Consumer Price Index 2.3.9Consequences of Inflation 2.3.10Causes of Inflation 2.3.11Inflation & Unemployment Tradeoff 2.3.12The Short-Run Phillips Curve 2.3.13The Long-Run Phillips Curve

2.4

Economic Growth, Poverty & Inequality

2.4.1Measuring Economic Growth 2.4.2Determinants of Productivity 2.4.3Economic Growth & Productivity 2.4.4Absolute & Relative Poverty 2.4.5Inequality 2.4.6Inequality 2 2.4.7Lorenz Curve 2.4.8Government Policy on Poverty 2.4.9End of Topic Test - Poverty & Inequality 2.4.10Application - Inequality & Poverty

2.5

Fiscal Policy

2.5.1Introduction to Fiscal Policy 2.5.2Fiscal Policy and AD-AS Model 2.5.3Fiscal Policy Lags 2.5.4Automatic Stabilizers 2.5.5IB Multiple Choice - Fiscal Policy

2.6

Monetary Policy

2.6.1Objectives of Monetary Policy 2.6.2Monetary Policy Implementation 2.6.3Monetary Policy & AD-AS Model 2.6.4Monetary Policy Lags & Pitfalls

2.7

Supply-Side Policies

2.7.1Supply-Side Policies 2.7.2Supply-Side Policies 2

3

The Global Economy

3.1

International Trade

3.1.1Globalisation 3.1.2Globalisation for LEDCs 3.1.3Globalisation for MEDCs 3.1.4Comparative Advantage & Trade 3.1.5Protectionism 3.1.6Arguments for Protectionism 3.1.7Arguments Against Protectionism 3.1.8End of Topic Test - Globalisation & Trade 3.1.9Case Study - Globalisation & Trade

3.2

Exchange Rates

3.2.1Floating Exchange Rates 3.2.2Fixed Exchange Rate 3.2.3Effect of a Stronger & Weaker Dollar

3.3

The Balance of Payments

3.3.1Balance of Payments 3.3.2Balance of Payments 2 3.3.3FDI & Reducing a BoP Deficit

3.4

Economic Integration

3.4.1Customs Unions & WTO 3.4.2Merged Currency

3.5

Terms of Trade

3.5.1Absolute & Comparative Advantage 3.5.2Gains from Trade 3.5.3Terms of Trade 3.5.4IB Multiple Choice - Comparative Advantage & Trade

3.6

Economic Development

3.6.1Factors Influencing Growth & Development 3.6.2International Institutions 3.6.3Measures of Development 3.6.4Barriers to Development 3.6.5Case Study - The Bottom Billion 3.6.6End of Topic Test - Emerging & Developing

3.7

The Role of Domestic & International Factors

3.7.1Interventionist Strategies 3.7.2Development Strategies 3.7.3Development Promotion Policies 3.7.4End of Topic Test - Growth & Global Development 3.7.5Application Questions -Growth & Global Development

3.8

The Role of International Trade

3.8.1International Institutions 3.8.2End of Topic Test - Globalisation & Trade

3.9

The Role of Foreign Aid

3.9.1Aid 3.9.2Limitations of Aid 3.9.3Support for Aid 3.9.4Application Questions - Developing Countries

Jump to other topics

1

Microeconomics

1.1

Competitive Markets: Demand & Suply

1.1.1Markets & Demand 1.1.2Diminishing Marginal Returns 1.1.3Supply 1.1.4Market Equilibrium 1.1.5Price Mechanism 1.1.6Consumer & Producer Surplus 1.1.7IB Multiple Choice - Demand 1.1.8IB Multiple Choice - Supply

1.2

Elasticity

1.2.1Elasticities of Demand 1.2.2Factors Affecting Price Elasticity of Demand 1.2.3Elasticity of Supply 1.2.4Price Elasticity of Supply 1.2.5IB Multiple Choice - Price Elasticity of Demand 1.2.6IB Multiple Choice - Price Elasticity of Supply 1.2.7IB Multiple Choice - Other Elasticities

1.3

Government Intervention

1.3.1Indirect Taxes & Subsidies 1.3.2Application Question - Taxing Prices or Quantities 1.3.3Subsidies & Price Controls 1.3.4Deadweight Loss & Government Intervention 1.3.5Elasticity & Tax Incidence 1.3.6IB Multiple Choice - Government Intervention

1.4

Market Failure

1.4.1Types of Market Failure 1.4.2Introduction to Externalities 1.4.3Negative Externalities 1.4.4Policy for Negative Externalities 1.4.5Positive Externalities 1.4.6The Deadweight Welfare Loss of Externalities 1.4.7Case Study - The Externalities of Education 1.4.8Public Goods & the Free-Rider Problem 1.4.9Asymmetric Information 1.4.10End of Topic Test - Market Failure 1.4.11Application Questions - Market Failure

1.5

HL: Theory of the Firm & Market Structures

1.5.1Theory of the Firm & Market Structures

2

Macroeconomics

2.1

The Level of Overall Economic Activity

2.1.1The Circular Flow of Income 2.1.2Defining GDP 2.1.3Limitations of GDP 2.1.4IB Multiple Choice - Economic Indicators 2.1.5Business Cycles 2.1.6Output Gaps

2.2

Aggregate Demand & Aggregate Supply

2.2.1The Aggregate Demand Curve 2.2.2Components of Aggregate Demand 2.2.3Shape of the Aggregate Demand Curve 2.2.4Shifts in Aggregate Demand 2.2.5IB Multiple Choice - Aggregate Demand 2.2.6Short & Long-Run Aggregate Supply 2.2.7Alternative Models of LRAS 2.2.8Equilibrium in the AD-AS Model 2.2.9Output Gaps & the AD-AS Model

2.3

Macroeconomic Objectives

2.3.1Introduction to Unemployment 2.3.2Limitations of Unemployment 2.3.3Types of Unemployment 2.3.4Causes & Impact of Unemployment 2.3.5Defining Inflation 2.3.6Measuring Inflation 2.3.7Use of Index Numbers 2.3.8The Consumer Price Index 2.3.9Consequences of Inflation 2.3.10Causes of Inflation 2.3.11Inflation & Unemployment Tradeoff 2.3.12The Short-Run Phillips Curve 2.3.13The Long-Run Phillips Curve

2.4

Economic Growth, Poverty & Inequality

2.4.1Measuring Economic Growth 2.4.2Determinants of Productivity 2.4.3Economic Growth & Productivity 2.4.4Absolute & Relative Poverty 2.4.5Inequality 2.4.6Inequality 2 2.4.7Lorenz Curve 2.4.8Government Policy on Poverty 2.4.9End of Topic Test - Poverty & Inequality 2.4.10Application - Inequality & Poverty

2.5

Fiscal Policy

2.5.1Introduction to Fiscal Policy 2.5.2Fiscal Policy and AD-AS Model 2.5.3Fiscal Policy Lags 2.5.4Automatic Stabilizers 2.5.5IB Multiple Choice - Fiscal Policy

2.6

Monetary Policy

2.6.1Objectives of Monetary Policy 2.6.2Monetary Policy Implementation 2.6.3Monetary Policy & AD-AS Model 2.6.4Monetary Policy Lags & Pitfalls

2.7

Supply-Side Policies

2.7.1Supply-Side Policies 2.7.2Supply-Side Policies 2

3

The Global Economy

3.1

International Trade

3.1.1Globalisation 3.1.2Globalisation for LEDCs 3.1.3Globalisation for MEDCs 3.1.4Comparative Advantage & Trade 3.1.5Protectionism 3.1.6Arguments for Protectionism 3.1.7Arguments Against Protectionism 3.1.8End of Topic Test - Globalisation & Trade 3.1.9Case Study - Globalisation & Trade

3.2

Exchange Rates

3.2.1Floating Exchange Rates 3.2.2Fixed Exchange Rate 3.2.3Effect of a Stronger & Weaker Dollar

3.3

The Balance of Payments

3.3.1Balance of Payments 3.3.2Balance of Payments 2 3.3.3FDI & Reducing a BoP Deficit

3.4

Economic Integration

3.4.1Customs Unions & WTO 3.4.2Merged Currency

3.5

Terms of Trade

3.5.1Absolute & Comparative Advantage 3.5.2Gains from Trade 3.5.3Terms of Trade 3.5.4IB Multiple Choice - Comparative Advantage & Trade

3.6

Economic Development

3.6.1Factors Influencing Growth & Development 3.6.2International Institutions 3.6.3Measures of Development 3.6.4Barriers to Development 3.6.5Case Study - The Bottom Billion 3.6.6End of Topic Test - Emerging & Developing

3.7

The Role of Domestic & International Factors

3.7.1Interventionist Strategies 3.7.2Development Strategies 3.7.3Development Promotion Policies 3.7.4End of Topic Test - Growth & Global Development 3.7.5Application Questions -Growth & Global Development

3.8

The Role of International Trade

3.8.1International Institutions 3.8.2End of Topic Test - Globalisation & Trade

3.9

The Role of Foreign Aid

3.9.1Aid 3.9.2Limitations of Aid 3.9.3Support for Aid 3.9.4Application Questions - Developing Countries

Practice questions on Factors Influencing Growth & Development

Can you answer these? Test yourself with free interactive practice on Seneca — used by over 10 million students.

1
Which of the following are included in the UN's definition of development?True / false
2
Which of the following are often characteristics of less-developed economies?True / false
3
Which of the following terms refers to an economy where the government allocate resources rather than the price mechanism?Multiple choice
4
Which of the following is an example of a command economy?Multiple choice

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IB Multiple Choice - Comparative Advantage & Trade

International Institutions