Chapter 3

Economic growth and development

 

(A) Very Short Questions and Answer:

1. Write one feature of sustainable development.

Ans: It improves the quality of human life.

2. Define sustainable development.

Ans: Sustainable development can be defined as an approach to the economic development of a country without compromising with the quality of the environment for future genera tion.

3.  Give two examples of sustainable development.

Ans: 1) Wind energy

(ii) Solar energy.

4. What is global warming?

Ans: It is a situation of the gradual but consistent rise in the atmospheric temperature.

5. What is land degradation?

Ans: It refers to a decline in the quality of soil, water or vegetation conditions.

6. What is economic development?

Ans: Economic development is programmes, policies or activities that seek to improve the economic well being and quality of life for a community.

7. How is development related to economic growth?

Ans. If the economy of the country progresses, it will automatically reflect in human development. Similarly, if the people of a country are progressing, they will contribute to the overall development. Thus, development and economic growth are interrelated.

8. How is development related to economic growth?

Ans: If the economy of the country progresses, it will automatically reflect in human development. Similarly, if the people of a country are progressing, they will contribute to the overall development. Thus, development and economic growth are interrelated.

9. Who invented the HDI index?

Ans: Mahbub ul Haq.

10. What is meant by adult literacy rate?

Ans. Adult literacy rate refers to the ratio of literate adult population to the total adult population in a country.

11. Write any two reasons for a high human development index.

Ans. (i) Investment is more in the social sector.

(ii) Good Governance.

12. What is purchasing power parity?

Ans. Purchasing power parity is a measure of the price of specific goods in different countries and is used to compare the absolute purchasing power of the countries.

(B) Short Questions and Answer:

1. Mention the basic characteristics of economic growth.

 Ans. (a) Economic growth is an increase in the production of goods and services in a country.

(b) Economic growth is measurable through quantitative factors like increased per capita income and GDP.

(c) Economic growth focuses on income.

(d) Economic growth is a gradual increase in consumption, government spending, net exports and investment.

(e) Economic growth deals with quantity.

(f) It focuses mainly on the present and does not consider sustainability.

2. How does purchasing power relate to inflation and cost of living?

Ans. Inflation is the process of goods and services going up in price over time. Any time inflation occurs, purchasing power decreases because each unit of currency becomes less valuable in terms of what it can be expressed for.

 During deflation, which are much rarer, prices fall and thus purchasing power increases. In other words, purchasing power and inflation have an inverse relationship

3. State the importance of human development index.

Ans. HDI is necessary to determine social measure of develop- ment for calculating the overall development of a nation. It measures the socio-economic factors and therefore is considered very effective in measuring the performance of a country in terms of these factors. HDI acts as a tool in evaluating the socio-economic status of nations around the world every year and as such acts as a reliable indication of the development of nations.

(C) Long Questions and Answer:

1. Briefly explain the uses of per capita income as a measure of economic development.

Ans. (i) Per capita income is a crucial tool in economics and statistical studies and a useful indicator of the living standard of people which also influences business strategies and decisions.

(ii) Per capita income measures the amount of money earned per person in a nation.

(iii) It indicates the average income per person in a region which help to evaluate the standard of living of the population living in a region.

(iv) PCI is a general parameter to ascertain the possession of wealth or lack of wealth by the population in a region.

(v) It is useful in evaluating people's affordability and purchasing power.

(vi) It indicates whether certain commodities and facilities are out of reach by average people in terms of financial aspects.

(vii) Businesses use per capita income information for deciding the marketing and sales strategies for potential customers depending on their income structure.

(viii) Prominent business chains and owners consider the per

capita income as the chances of profitable revenues reduced with lower per capita income. 

(ix) The per capita income is a useful indicator to compare the economic situations of countries.

2. Analyse the role of purchasing power parity in macro- economic analysis.

Ans. Purchasing power parity (PPP) is a popular metric used by macro-economic analysts that compares different countries' currencies through a 'basket of goods' approach. PPP allows economists to compare economic productivity and standard of living between countries. Some countries adjust their gross domestic product (GDP) figures to reflect PPP. To make meaningful comparisons of prices across countries, a wide range of goods and services must be considered. Every few years, the world bank releases a report that compares the productivity and growths of various countries in terms of PPP and US dollars. Some forex traders use PPP to find potentially overvalued or undervalued currencies. And investors who hold stocks or bonds of foreign companies may use the survey's PPP figure to predict the impact of exchange rate fluctuations on a country's economy. and thus on their investment.